[2019] So what exactly does dream state to now?

Sure. There's a couple things it does.

1. The terror radius is replaced with the lullaby. This makes it difficult to tell how close the killer is, whether he's chasing someone or coming for you.
   
2. His generator teleport cooldown is reduced by 15% each sleeping survivor. (60% total for all 4)
   
3. Only sleeping survivors are affected by his traps.
   
4. Certain add-ons add action speed penalties for sleeping survivors.
   
5. If they are using dream pallets, you'll want to wake up often to see which are real, and toss down any fake ones you notice next time you fall asleep.

There's no penalty to waking up; it's not like the Plague where cleansing makes her more powerful. Waking up only benefits the survivors.