I had no time to sit and think at work today but I did think of something last night while lying in bed.
I was meditating on the dream people because I was trying to fall asleep and it seemed appropriate. I wondered how their reproduction progressed after the female was impregnated in the dream. For creatures that exist within two realms, I figured there would be two sorts of progression.
In the physical world, the child conceived through the dreamscape is present as a single cell possessing its unique DNA. How this comes about exactly was not detailed though I might come up with something later. The cell migrates from an ovary-like organ in the female's midsection towards her front abdomen. There, she possesses two distinct layers of skin (though each is made up of multiple layers of dermis) and the growing child passes through the interior layer to reside within the cavity between them. Various vessels and ducts within the inner layer of skin attach to the rapidly multiplying cells as the child migrates; these provide nutrients and remove waste just as the umbilical cord and blood vessels do in the placenta. As the child grows, the mother begins to "show" just as a human woman does. However, due to the nature of the outer skin layer, the pregnancy "hump" appears as a gigantic blister on her midsection. Towards the end of the pregnancy, the skin will stretch to the point that it becomes nearly transparent and the child can be seen. Birth then consists of the blister breaking open and the child being removed. This is not an unexpected occurrence as with human pregnancy (the water breaking) but a deliberate act on the part of the parents. The excess skin of the blister is removed and the underlying skin then heals to form the new outer layer, with a new inner layer forming internally after some amount of time. A dream person who has given birth is easily identified by the pattern encircling her abdomen, though how many births cannot be so gleaned.
The child exists in the dream world from the first moment of his conception. He appears as a tiny child who will grow beside his physical body and remain within the dream world until birth. Each night, his parents join him in the dream world to teach and nuture and love their child, just as they will for most of his young life. While within the dream world, a dream person has capabilities beyond those he possesses in the physical world and so the learning curve is much more gradual for their offspring. Because of this existence and teaching, dream children born into the physical world already know as much as a human pre-schooler and it takes them very little time to control their physical bodies as well as a much older human child, allowing them even the power of speech after only a few days (it also helps that a dream person's anatomy matures much more quickly than a human's; even if a situation were contrived to give a human infant the requisite knowledge and 'experience', the fact that the body has not matured to a point where certain activities are even physically possible retards progress).