Hi Violet!
There was a thread posted a while ago describing something similar and I personally have similar experiences. I have been at this for six years and have had the time and experience to try to objectively understand what happens to me with this stupid disorder.
We remember dreams when we are awaken during one. Each apneic event is physiologically the same as being suffocated. Our bodies' fright and flight response kicks in. When I fall asleep without my CPAP on

, I will begin to dream that someone is trying to suffocate me or that I am suffocating for some unexplained reason. Obviously, my dream is mimicing what is really happening. I do not have these dreams when I use my CPAP because the suffocation is not occuring. I imagine that yours have the same cause as mine, a lack of oxygen and/or an increase in carbon dioxide. When you use your CPAP, the physical conditions that precipitate the hallucinations are no longer there.
Another motivator to use our CPAPs!
To answer your severity question:
5-15 events/hour Mild Obstructive Sleep Apnea
15-30 events/hour Moderate OSA
>30 events/hour Severe OSA
Vicki
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That which does not kill you makes you stronger-Friedrich Nietzsche
Friedrich must of had apnea.