spoiler:


Twilly's last lines in that exchange are:

Twilly: Battle ON? You haven't been listening, stranger. The fighting ends here. Nothing can reach us anymore, so we don't need to fight back. And if we start fighting each other again... HE will come.
Twilly: So it'd be better if you surrender quickly. Then I can take you to my hospital and we can be friends after you recover...

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Blue Mage: That's what this nightmare *is*. It meanders and gets sidetracked, as dreams do, but this thinnest shell of your fear is your escape. The world where you don't fight. Where no one does.
Blue Mage: The world where your very nature is so forbidden that your name and anything like it have come to an end. With all the cold tyranny that it takes to drag the pulse of the world to a screeching halt.

spoiler:

Remembering the meaning of Omega - the title of The'Galin's avatar. And the role such a servant follows during the Manifestation. The Chosen's dreams, then, are showing you a fear even worse than giving in as War and becoming bound to that role: A hypothetical scenario in which Lore becomes hopelessly corrupt and they are called upon to test it.