Dreams and nightmares occur during REM (rapid-eye-movement) sleep. In normal sleepers, there is more deep sleep at first, and then as the hours pass, periods of REM sleep become longer. This general pattern, however, can be distorted or disrupted by any one of a number of sleep disorders or disturbances, many of which have been shown to be associated with bipolar disorder.
According to the article Stormy Sleep by Terrance Malloy, RPSGT, "Psychiatric disorders are common in sleep disorder patients, and disturbed sleep often afflicts patients with psychiatric disorders." The article notes a study showing that a very high percentage of insomniacs and hypersomniacs met the criteria for mental illness.
Vivid dreams are common among adult bipolars. I've had them for as long as I can remember, except for a few periods when they were suppressed by medications. The following paragraph from Bipolar II Diagnosis at Psycheducation.org describes my own unmedicated sleep/dream experience of about 10 years ago almost perfectly:
[T]here are people with depression whose most noticeable symptom is severe insomnia. These people can go for days with 2-3 hours of sleep per night. Usually they fall asleep without much delay, but wake up 2-4 hours later and the rest of the night, if they get any more sleep at all, is broken into 15-60 minute segments of very restless, almost "waking" sleep. Dreams can be vivid, almost real. They finally get up feeling completely unrested. Note that this is not "decreased need for sleep" (the Bipolar I pattern). These people want desperately to sleep better and are very frustrated. [For me, falling asleep was also difficult - could take up to an hour.]Page 2 - Nightmares and Night Terrors