I'm sure Tony will respond to this but I do have some experience with 'dream demons'.
I've found that 'demons' are nothing to fear, they are often bad habits, addictions, feelings we are afraid to feel, aspects of ourselves that we don't like or want to admit to, cravings.
You can dialogue in waking life with this demon. Ask it what it wants, what it needs - my practice is, to then offer it a big glass of magical elixir that gives it whatever it is seeking. I also put myself in the demons place, take on it's posture and characteristics, which gives me insight into it's point of view. Because it *is* me, (it's MY dream! MY brain is making this up at night!) it gives me valuable information about where I am in conflict with myself. It could be ANYTHING, and often I feel surprised at how something so frightening, turns out to be very simple.
Here is a story you might find interesting, of how a man who was haunted by a dream character that would frighten the bejeezus out of him whenever he had a lot of anxiety in his life, handled his dream:
http://www.radiolab.org/story/182747-wake-up-dream/From Tony's site, here is some info on dialoguing with your dream character:
http://dreamhawk.com/dream-encyclopedia/dialogue-with-a-dream-character-or-object/http://dreamhawk.com/dream-dictionary/practical-techniques-for-understanding-your-dreams/Some other perspectives on dealing with dream (or waking life) demons:
Feeding Your Demons (where I got the idea to give the demon the elixir - also transforms the demon into an ally)
http://taramandala.org/about-kapala-training/the-process/Lucid dreaming as Shamanic Consciousness
http://www.dreamviews.com/beyond-dreaming/102974-lucid-dreaming-shamanic-consciousness.html"I was reading for a while, then I noticed that the wall (about 6 feet from the end of my bed) started to sort of wobble. My body was paralyzed, unable to move. My breathing was kind of non-existent, though I desperately needed more air. Suddenly, it opened up into a black void. Like a 9 ft black hole, vaguely the shape of a figure. "O my god," I thought, "I am dreaming. This can't be true." The black-hole oozed into the room. I was beyond terror. I still don't understand how my heart didn't collapse. The blackness started molding itself into a recognizable shape. It became a 9 ft tall Japanese devil or devilish-looking Samurai. Viciously grinning he said, "You are not dreaming. You thought you could ‘integrate me.'" He then, in one sweeping movement, stretched out his enormous black hand, grabbed me, stuffed me into his blood-red mouth, and swallowed me. Then I fell into unconsciousness for a moment, now a vortex pulled me down into an abyss of no dimensions. All of a sudden, I was spat back out into his hand. Somehow, I had crystallized into a red ruby. I WAS a ruby; I felt like a ruby. So there I was, in the big hand of a giant, looking at him, and he looking at me. In that moment-seeing each other-something happened. We looked at each other, became truly aware of each other, and then, there was love. I know what the mystics talk about/can't talk about. There is believing, and then, there is knowing.[xxiii] "
I feel really happy you asked about this, because it reminds me of the affinity and call I feel to work with demons and to engage with others in this practice, thank you!