The dream sequence occurs after you long rest twice and in between each you used your Illithid powers at least once.
1. Use Illithid Powers
2. Long rest 1 "Where are you?"
3. Use Illithid powers
4. 1st Full Dream sequence
5. Use Illithid Powers
6. Second full dream sequence
No when you use the ilithid power, there's no automatic dream sequence the next long rest. It can take several long rests, using many IP before it triggers. In my current PT I use the power as much as possible, because I'm curious to see how the dreams evolve. I don't care if the player turns into a mind flayer. I'm trying out the palladin and can't really connect to it, so it's ideal for this kind of experiment.
So I also wanted to give the dream person maximum access to my mind and avoid all resistance, and it's really annoying that the choices in the 3rd dream were phrased in such a way that I chose the opposite of what I wanted to do. "resist the violent thoughts" and the result was that the player tried to strangle the dream person. Grrr......
And now there's no way back to choose otherwise unless I go through that complete goblin camp battle again.