I've never heard of anyone dying in a dream, though I can't discount the possibility. However, it just doesn't make sense to have to replay a dream mission because, say, a stray heavy beam hit you. Besides, you don't have to know that you're invulnerable in your first time playing the mission - in my own experience, the way I realize that I'm in a dream is usually by something defying my known laws of physics. It would make sense for the player to gradually realize that the Lucifer encounter is a nightmare before the game tells you and ends the mission.