Theory: Super Mario Bros. 2 wasn't a Dream

Abstract
Super Mario Bros. 2/Super Mario USA is not just a dream that Mario had, but instead a game that takes place within the Dream World/Dream Depot seen in Mario & Luigi: Dream Team/Mario Party 5.

In its infamous ending, Super Mario Bros. 2 is seemingly revealed to just be a dream that Mario had one night. This is the interpretation that most who play the game take away from that scene. However, later games would suggest that there is more to this reveal than meets the eye.

Arguments

 * Argument 1: The game doesn’t exactly hide that Subcon is in a sort of Dream World. The manual for Super Mario Bros. 2 states that when Mario first arrived in Subcon in his initial dream, he heard a voice that said “Welcome to ‘Subcon’, the land of dreams.” The game’s opening also tells us the same thing. Mario, after climbing a long stair in his dream, found “another world”. It also states that many of the enemies found in the game are from the “world of dreams”. These statements indicate that it isn’t just within Mario’s imagination.


 * Argument 2: Many species and characters found in Subcon have since appeared in the real Mario world, including Shy Guys, Pokeys, Bob-ombs, Ninjis and even Birdo. Not to mention the Sprixies, which highly resemble the residents of Subcon.


 * Argument 3: BS Super Mario USA is the pseudo-sequel to Super Mario Bros. 2. It tells us that Subcon was saved by Mario, Luigi, Peach and Toad and that they built golden statues to honour Mario’s heroism. Wart escaped through a dream portal to another part of the Dream World after the events of the game. It explains that there are as many areas of the Dream World as there people’s dreams. Wart and the 8-Bits returned to Subcon once more, which prompted Ōsama, King of Subcon, to use the Power of the Stars to physically transport Mario & the other heroes back to Subcon to save the Dream World once again. This makes it clear that Subcon is a real place that can be visited and exists in another world, separate from Mario’s own world, that’s also accessible through dreams.


 * Argument 4: In Mario & Luigi: Dream Team, we learn about the Pi’illo Island and the Pi’illos, who were a race of beings who had the ability to open Dream Portals and travel between the Dream World and the real world. During the events of this game, Luigi can open Dream Portals by sleeping, allowing others to travel to the Dream World. While Luigi dreams, a version of himself called “Dreamy Luigi” appears in the Dream World. If we take the Dream World seen here to be the same one in Super Mario Bros. 2, it would mean that the Mario & Co. that we play as in Super Mario Bros. 2 is Dreamy Mario & Co.. In BS Super Mario USA, it’d instead be the real Mario & Co.


 * Argument 5: The Dream Depot, which appears in Mario Party 5, is said to be a “Dream World” where “everyone’s dreams come together” - “a world constructed of everyone’s dreams”. This seems to align with both the descriptions of Subcon and the Dream World of Mario & Luigi: Dream Team. During Mario Party 5, the Star Spirits invite Mario & his friends to the Dream Depot. Bowser also travels there in an attempt to destroy all of the Dream Worlds, along with the good dreams they’re built on, and replace them with his own dreams.


 * Argument 6: In Paper Mario: Color Splash, a Yellow Toad in Sunglow Ridge mentions that he dreamt about a bad guy named Wart who took over their log factory. If Wart was really just a made-up character in Mario’s Dream, then how could he have appeared in the dream of a random Toad? The Toad even questions whether or not it was just a dream.