I don't think it's a dream. I think Regina really will be going down this season. She may not die, and Emma may just cut down her tree. Someone else speculated that perhaps the apple tree is the embodiment of Regina's power. If the tree gets chopped to pieces, perhaps Regina's power will disappear.
Also, I'm calling that Henry will sacrifice himself for his mother, Emma, in order for her to believe in magic. I think that MM and David will remember before Emma and also play an important role in getting Emma to believe.
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"That’s how you know you’ve really got a home. When you leave it, there’s this feeling that you can’t shake. You just miss it." Neal Cassidy