Hi
I expect that your patient has a Post Traumatic Stress Reaction (PTSD). This used to be called shell shock in earlier war environments, but can occur after any trauma. Sleeping at night may give the patient a feeling of loss of control, which he fears. He has associated nightmares with nightime sleep, rather than daytime.
The headaches are definitely from the spine. Deep massage for Levatore Scapulae, plus stretching, should assist in headache reduction. Occipital headache is associated with C2, and frontal headache with C7. Try deep frictions and Wikipedia reference-linkfacet joint glides for these areas.
Nightmares may also occur with circulation problems, caused by sleeping posture. A contour pillow that supports the neck without pushing the head into flexion or lateral flexion, is best. If your patient sleps sitting up during the day without headache, but has headache laying down, suspect posture.

The previous post re coccyx pain needs to be included, as erector spinae tension and neural tethering may contribute to the overall picture. Cerebrospinal fluid increased tension can be aggravated by postural position.
Hope the above helps.
MrPhysio