When I was a little med student we had a philosophy lecturer in to talk about ethics and she mentioned the Chinese proverb about the man who dreamt he was a butterfly and now wasn't sure he wasn't the butterfly dreaming of being a man.
So anyway I wondered about dreams inside dreams, illusions inside illusions. Do any philosophers talk about them?
The original story (the dream about the butterfly) is from the writings of Chuang Tzu (also transliterated as Zhuangzi) who was a significant early Taoist philosopher noted for a mischievous sense of humor and cynical outlook. You might look into his works as a starting point.
As @Dog mentioned, Descartes' famous Meditations takes dreams as a major subject. It's quite a short and accessible work, well worth the read.
I'd also recommend Plato --although he doesn't specifically deal much with dreams, his chief contention is that our entire reality is an illusion, and that we can get nearer or further from the capital T truth, sometimes by wrapping ourselves in layer of illusion and/or freeing ourselves from the same. The Allegory of the Cave is a good starting point.
Finally, while original work is not appropriate for this site, this is a topic of quite some interest to me --feel free to contact me directly if you have interest in my own views.
From my experience there isn't exactly such a phenomena as a dream within a dream, but rather a different phenomena called False Awakening which is often confused with it. Bertrand Russell mentions false awakenings in his book Human knowledge:
It may be said that, though when dreaming I may think that I am awake, when I wake up I know that I am awake. But I do not see how we are to have any such certainty; I have frequently dreamt that I woke up; in fact once, after ether, I dreamt it about a hundred times in the course of one dream. We condemn dreams, in fact, because they do not fit into a proper context, but this argument can be made inconclusive, as in Calderon's play, La Vida es Sueño (Life Is a Dream). I do not believe that I am now dreaming, but I cannot prove that I am not. I am, however, quite certain that I am having certain experiences, whether they be those of a dream or those of waking life .
I was not able to understand the rest of you question.
Clearly you cannot be dreaming. College students don't sleep!
But seriously, as far as philosophers go, Descartes' Meditation seems like the best starting point when asking the question "How do we know that this isn't all an illusion?" That will no doubt help inform your perspective so you can ask more specific questions.
HOWEVER
Before doing that, I would highly suggest perusing the works of Dr. Stephen LaBerge. LaBerge is the foremost authority on "oneirology", or, the study of dreams. Conscious dreaming, not quite Inception-style, but along the same lines, is his specialty.
Exploring the World of Lucid Dreaming ebook is a very good read. It will help you to understand exactly what a dream is and what it isn't, as well as serving as a handbook for conscious dreaming, if that's something that you'd be interested in. (Note: it's a wonderful experience, but, wait until you have a regular sleep cycle to get into this)
You should not have written her off. As a medical fact stuff like that happens all the time. We call it schizophrenia.
But really, we can consider a state of mind like that of the truly psychotic, or those in 'psychotomimetic' states like those induced by dreaming or drugs like LSD and DMT (which theoretically induces the same neurochemistry as dreaming) or close relatives like psilocybin at high dosed, as dreams, and within them there can occur other dreams.
Real afficionados of pure DMT (as distinct from ayahuasca) in particular easily become convinced all dreams are equally valid, and that the creatures they interact with in the induced dreams are in some sense as real as those of waking life -- See Terrence McKenna on the subject. There are collections of such creatures: "See Urchins" (sic, it is a pun) and "Machine Elves" in particular, that occur to different people in the same state and are occasionally helpful to individuals, or seem concerned or excited about human progress.
Taking that DMT immersion as a model for dreaming, you can fall asleep on the drug, and enter a state sometimes called 'slipping' (again pun, "sleep tripping") where you dream almost continually, and don't get much sleep at other levels of brain activity. Dreams recounted from such a state often involve false wakings, and other tropes that mimic the idea of dreams within dreams.
The psychedelic community, therefore, talks a lot about these things, but not in a deeply philosophical way. You might still get interesting insights about layered hallucinations from the more experimentally inclined psychedelic writers like Rick Strassmann and Terrence McKenna, as noted above.