Trying to rationalize with your toddler is just not going to be effective, especially while he is afraid. I have found that the fear itself is a new emotion for your child and this is a good time to teach how to handle fear. Share how you handle fear, during the day, sometime. The opposite of fear is feeling safe. When he is awake and not upset, ask what thoughts or things help him feel safe. Share what things you lean on to help you feel safe. Is it hearing your husband breathing? Is it the "just right" feeling covers? Maybe it's simply telling yourself your guardian angel is watching over you.
A night light might be just the answer you are looking for. It would be a nice idea to have him pick out a night light he likes. Maybe he likes Thomas the Train or Franklin the turtle.
I have turned to music as a soothing way to fall asleep. In particular, nature sounds and relaxation music. Lori Lite has several MP3s and CDs available (I found them on Amazon) which include stories, like of a boy who lets go of his anger and like a boy who climbs a hill then lays down on a rock relaxing in the warm sun -- that is such a nice image to me! I can feel my tense shoulders loosen just a bit right now! LOL
I had to put a timer on the CD player (like what I use for turning on and off lights when we are on vacation) so the player isn't on all night.
Still, I found the stories a nice practice to do with my child at bedtime: relaxing and affirmation.
I have heard that child psychologists recommend not using any night lights. But if it works, use it! I have kept away from the really bright ones. The bright ones are great for use in the bathroom so the kids are not stumbling in the middle of the night. Even so, you find that you need to use a bright one in the bedroom for a while then work toward a dimmer one.
Oh, and for my older boys, I found a rechargeable power emergency light. It's small, stays plugged in (there is a small red light indicating there is power), and turns on like a flashlight (well almost as bright as a flashlight) if the power goes off. That has been so reassuring for that fear of the power going off while they are away from me and it is night time or just plain dark (and usually stormy).
Just stay away from trying to talk about the fears while he is afraid and concentrate on repeating the "going to bed" routine when he has calmed down. Yes, the amount of time for him to calm down will decrease! Right now he is depending on you to calm his fears. Reassure him he has the power to tell his dream "monsters"/fears to go away! that he has the power to say "shoo" and watch them run away!
Good luck! We will all want to hear what works for you two! ;)