First of all, the question is ill-posed: dreams are, of course, completely real, and hence part of reality. So we’re really debating whether the sort of ‘bottled’ reality you get in a dream is ‘better’ than the everyday reality (that includes dreams).
For me, the answer seems straightforward: there’s lots of things you can do in the full reality that you can’t do in the dream version—meet new people, for one. But also, you can’t look up who the present king of France is on wikipedia in a dream, if you don’t already know the answer. Likewise, you can’t learn carpentry or playing the trumpet—you can neither acquire new knowledge, nor new skills. Anything you encounter in a dream is brought there by you, and what you bring to the dream is a function of what you’ve encountered in reality—that’s just an alternative way of expressing the fact that dreams, perhaps contrarily to appearance, aren’t some ‘alternate reality’ where you have total control, or some approximation thereof, but are merely a subset of reality, of experiences shaped by those you had in actual reality.
A defining factor of reality is that it pushes back when you prod it; dream realities don’t do that, since both the thing pushing and what appears external to it is in fact the same thing, the dreamer’s mind. So dreams are invariably less than waking reality.
Reality sometimes says no—it opposes our intentions. But it’s this opposition that ultimately allows us to acquire new knowledge, to grow and adapt. If this factor is rebuked in favor of some ever-acquiescing virtual world, we’ll lose that possibility. Indeed, inasmuch as thought is simply a reaction to external hindrances—you have to think about how to accomplish something, reflect on external factors you can’t change, and so on—meaningful thought might not even be possible in such a world. There’s nothing for it to act on.
So for me, it’s reality all the way; although I can to a degree understand the appeal of the kind of power fantasy dreams, particularly lucid ones, represent, especially to those afraid (on some level) of opposition, contrary viewpoints, and change.