You haven't had a nightmare for years? I pity you Anyway, your bro and you sound cool. [Did you ever write horror stories out of them?]
Sadly no but if I still had that book I would definitely write some horror stories from it, but a lot of that stuff got left behind when we moved house.. theres probably some person reading it now thinking what the hell...
I think the first rule in writing, is there is no wasted writing. It may not be profitable in itself, but it all helps you improve your writing. If the dream inspires you to write it, write it. Then look at it and see if you can make it into a SS. I don't linger in nightmares, last time I was chased in a nightmare,(when I was 12) I rounded a corner, knelt down rolled a large rock over, picked up the revolver and shot the attacker in the face. They don't mess with me anymore.
I say go for it! All of my best characters come to me in dreams/nightmares. Sometimes the plots aren't perfect at first but a little work and they're great. Also, the characters feel much more real than any I've purposefully tried to create. Hence the quote in my signature.
Forget your English teacher. Inspiration can come, and should from anywhere possible. If you can develop the nightmare into a good story, then by all means do it.
Your teacher is a bloody idiot (in my humble opinion). Many great books have been inspired, and on the odd occasion, even written completely from dreams. Never ignore the power of the sleeping mind. It is a valueable tool. USE IT! Good luck with your writing.
I feel that I am fairly uptight and unimaginative in my day to day life , but... when I have dreams I remember, I write them down. They make absolutely no sense to me, but they stand out as something worth pursuing, and so I write them. Then, I work and rework the idea in my mind until it is coherent. At that point, it's just a concept or a scene, or a character, but from there, I see if I can build an outline of an entire story. When sorting these dreams, I seem to run into idea overload, so for me, dreams are the absolute perfect way to come up with story ideas. I think it's because it opens up a part of my mind that I usuaully have shut off. I sometimes daydream to the same effect too.
I once heard that a lot of Edgar Alan Poe's stories were based on his nightmares. Is this true? - I have no idea. What I will say is - take advantage of any good idea that come along, no mater what the source, you'd be a fool not to. EDIT Maybe your teacher meant that that particular story was not a good idea, therefore it would be better for you to make something up. She may want you to make more use your own imagination. Who knows? Teachers (with the exception of Miss Roberts) are only human after all.