No, I don't think he is because as ever he's being evasive and arch and just plain bonkers.
He's asked about MD, IE & LH. All three. And to say they're 'dreams on the screen' isn't the same as saying 'in this one (MD) there's a dream sequence'. Consider if someone asked - Are these films 'flashbacks on a screen'? A more straightforward interviewee might answer 'No - they're stories. But there are flashbacks in them'.
I mean, to refute that the whole film, or all three films, are somehow dreams-on-the-screen doesn't preclude the possibility that there's a dream sequence in MD.
This is a great interview, thanks for posting. He's such a crazy dude. Consider this:
Question:
You don’t discuss the meaning of your films. What about the interpretations of your audiences?
DL:
It’s not a game, that I like to confound people and see what they come up with. The filmmaker should have a definite, solid idea of what it means, but that never comes right away. It kind of comes part way and then more and more as it’s all revealed. And then when you’re working on the whole, by then you know what it means until the whole feels correct. When something is more abstract, all kinds of interpretations come out, but if I said, “Oh, that’s a wrong thing,” and I wasn’t willing to say mine, that would be a very bad thing. So I think every interpretation is valid. The analogy I give is, if a painting is a very super-realistic painting, people standing in front of it get basically the same take on it. Now you stand in front of an abstraction, many, many different things, depending on the viewer, start happening. And because there’s this circle between the painting and the viewer, film and the viewer, the mind is lively, the heart is lively, and any intuition they have is going while they are having this experience, and later all these different kinds of interpretations come out because each person has a little different one from the other. It’s just going to come out that way, and it’s kind of beautiful. There’s another thing I’ve been talking about, this thing of harmonics. Sometimes I think it’s possible to be true to an idea and that idea could be seen as the fundamental notes of a chord, and if you’re really true to those and translate them until they feel correct, then also the harmonics from higher things might be true, because the fundamental notes are true. So harmonics that you didn’t even know about might be true. Now somebody in the audience is getting a more sublime, cosmic kind of interpretation. Ten years from now I might see the same film and get that. If you’re true to the thing, you don’t know what you’re doing at all levels. It’s kind of strange.