A Lizards Nightmare is written terribly
Imagine going in blindly, hearing the Red Princess is being hunted by the Black Ring. You may not have the Red Prince but you can't just let her get hurt.
You make it through the arena just fine to find the dreamers. One step closer to helping the princess.
You speak to them and get absolutely no choice but to kill them out of self defense, can't even back out of the conversation. Also worth a note that they sound very suspicious so you can feel a little extra justified.
Then you get to the princess. Oh you killed the dreamers? Well your evil and gotta die. No dialogue to explain self defense, no persuasion check. Now the princess is dead, everyone is dead, all beacuse you wanted to help and the game didnt let you do it naturally.
Why would they build a quest where, if you proceed naturally and dont have the prince, everyone would get killed unless you save scum and lock pick/pickpocket a key to a door to avoid the dreamer fight?