D.W.
Does he remember these dreams the next day? If not, he could be having Night Terrors. They're common around this age, and they're more distressing to us as parents than they are to our children. According to the American Academy of Pediatrics, they pose very little harm to our children.
http://www.healthychildren.org/English/ages-stages/presch...
One of ours is a horrible sleeper, too. Both of our kids have occasional night terrors. We try to interact with them when it's happening. If they're unresponsive, it's most likely they're still asleep and having a night terror.
Good luck!