Amy suggests that the Dream Lord creates dreams, and the Doctor nods. "Dreams, delusions, cheap tricks." The DL asks if the "gooseberry," the third wheel, has a guess, and Rory gets pissy about that: If anybody's the gooseberry, he says, it's the Doctor. That's half-true. The DL says it's a delusion, but not one of his. Rory says Amy shares in this delusion, and the DL tells her to choose. She swears she has, and the DL just laughs. "You can't fool me, I've seen your dreams! Some of them twice, Amy." Some made him blush. The Doctor is not having it.
"Where did you pick up this cheap cabaret act?" The DL laughs and says it's the last thing the Doctor should needle anybody about: "If you had any more tawdry quirks you could open up a Tawdry Quirk Shop! The madcap vehicle, the cockamamie hair, the clothes designed by a first-year fashion student... I'm surprised you haven't got a little purple space dog, just to ram home what an intergalactic wag you are." It's not the meanest thing he'll say, but it might be the truest. The Doctor doesn't quite let it show on his face: How much of him, after the Time War took everything, exists just to make him cuddly? He wasn't always so funny, so charming, so adorable.
The DL explains the game: "Two worlds. Here in the time machine, and there in the Village That Time Forgot. One is real, the other's fake. And just to make it more interesting, you're going to face in both worlds a deadly danger. But only one of the dangers is real. Tweet, tweet. Time to sleep!" Or is that wake up? They hear the birds.
"I've always been able to see through you, Doctor," says the DL, down in Leadworth. Amy doesn't get it, not yet -- "What do you mean, always?" -- but the Doctor does. If you die in the dream, you wake up in the real world, but if you die in the real world, you of course die. Amy's still stuck on "always," and the DL laughs. "Now don't get jealous. He's been around, our boy. Never mind that, you've got a world to choose. One reality was always too much for you, Doctor. Take two, and call me in the morning." Like a doctor would say.
The Doctor, once the DL is gone, tosses out a million explanations for their visitor, but none of them are very convincing. "Maybe because he has no physical form. That gets you down after a while, so he's taking it out on folk like us who can touch and eat and feel." (This is almost right, despite being a lie. Mostly right.) All of the old folks have vanished. He's been wearing an adorable sweater since it got cold; he takes it off now and musses up his hair, but it soon rights itself. Outside, the kids are just playing in the square. Beautiful old stone walls.