I grew up in Marin County, here in Northern California. I was also the daughter of movie lovers and at least one comic book/animation enthusiast (when my father was asked what he would be doing if he weren't a revolutionary minister and dreamworker, he replied, "a comic book artist!").
One of the best art movie houses outside of San Francisco was (and it's still holding its own in that department) the Sequoia Twin Cinema in Mill Valley (now called the CineArts at Sequoia). We would go there regularly (sometimes once a week!) and watch all sorts of wild films. I loved reading as a child, so my parents were delighted to discover that I loved foreign films because I could read the subtitles. Of course, being a seven-year old watching an unrated French film in the 70's brought up some interesting questions in my little brain!
One of the other great things that the Sequoia Twin would do is show Sally Cruikshank's fantastic, amazing, dreamlike, inspiring, animated films. My Dad and I would be rooted to the spot as we watched her shorts. Her work is indescribable, but to me, seems VERY influenced by dreams. I can't find any evidence supporting this fact at all - but see for yourself! Face Like a Frog is one of my favorites (and now it's available on DVD!). My father and I STILL sing, "Don't Go in the Basement!" (performed by Oingo Boingo, no less!)
And as far as giant puppets - I'm not sure if this was inspired by dreams either, but images of this giant "princess puppet" went right into my dreams!
Experiencing videos like these always fill me with inspiration and excitement. I hope it does for you too!