How do you respond to "crazy" questions and hallucinations or bad dreams?

Let her talk about the dreams. Mom would dream she was going down a long hallway (her life) and couldn't find her room (uncertainty). Later on she dreamed of relatives who had passed and they would talk to her (premonition of death). Building a snowman is a reminiscence of being young and having fun.

By the time my mom reached the later stages of dementia she was not too verbal so I don't know if my answer will be helpful. I found that trying to convince my mom that what she was seeing was not there only upset her more. By asking questions and assuring her that the people in the room, etc, would not hurt her and that i would keep her safe seemed to calm her. If there was no calming mom and she was fully agitated, the doctor said it was ok to give mom a half or quarter of a seroquel to calm her down. Usually she fell asleep in her tecliner for a couple of hours then had no memories of what upset her when she woke up.

My mother occasionally sees things. I've found that it's kinder just to go along with it. She has a woman that visits her (not real). My mother can't tell me what she looks like or how she got into the apartment. The woman tells her that she will be visiting often. I just told mom not to go anywhere with her. I'm afraid she'll wonder off. Mom also told me that her shoes were smiling at her. I said that she has happy shoes. It makes her feel good that I don't think she's "crazy."

Excellent answers!
To them it is real. Proceed accordingly! My Mom kept seeing all kinds of bugs. We would spray a little bug s(air fresher)

I think it is best to play along, and respond to the feelings that it creates instead. My mother would insist that her mother was in the house. When I explain that her mother is 30 years dead she looks embarrassed, hangs her head and says "oh yes". Now I just play alone. No point in making her feel bad.

My mother also has started to have hallucinations. She and I will be having a conversation and she'll just stop and say "Randy (my brother) is on the phone and he wants to talk to you"...so I tell her that I will call him on my way home, so she tells him "she will call you on the way home", and then she picks up our conversation where we were. Definitely best to just play along, as these episodes don't seem to last very long - at least not yet.

Just treat the hallucinations as if they are real, for her they are! Ask her if she had fun building a snowman, who helped etc. Ask about the man and woman, does she know them? Are they nice? Think of it as a waking dream, if it is pleasant then you can be glad her mind is in a happy place ;)
If she is dreaming/hallucinating about something unpleasant I'll rub her back or shoulder and do my best to convince her it is just a bad dream, then I'll talk about something pleasant to try to distract her.

I agree with rose. Don't try to convince her it isn't real. Just make her feel safe and understood. Last Christmas, my Mom was in Genesis, final stage of LBD. Suddenly she looked down at the floor and said look at all these presents, I have to take them downstairs. When I was little, my parents would pile our presents in their bedroom closet, and bring them down christmas eve, she must have been reliving that. I asked her where they were and did she see them. She said, right there, pointing and very agitated. So, I told her we would take them downstairs later, I would help her. That calmed her down, she said ok. She forgot about it that fast. But it was real to her at the time.

My mom has never admitted to dreaming or hallucinating and is always angry if I question anything she says. The dreams/hallucinations are never, ever pleasant. Doesn't seem to matter how I react, it never seems to be what she wants to hear yet we still have pleasant moments. She still feeds herself and does okay when at the beautician's and the few times we go out and still behaves fairly well around others. I let her rant here at home during the daytime but thank God, when it goes on into the evening, some nights I can give her mirtazapine or now Ativan in a small dose so we can both sleep. With mom, it's always that the house is on fire and we have to leave, how I need to get ready right now and take her home, how dad is in the front yard hurt and needs her (he's been dead 13 years), that somebody wants her to take care of their kids and she doesn't want to, that this is her house and she screams for me to get out, I've taken everything she has, won't give her the car keys, won't let her go to work (retired 21 years). She won't get into her bed on the worst nights because there are too many people in there already, etc. Sometimes it's hilarious but I can't laugh too much. Her "familiar" is always telling her to ignore me, that I'm not her daughter. Her good moments are fewer and fewer, and time of day does not seem to matter. It always seems best if I just walk away when things get too hairy since she now rushes me and says she's gonna kill me. Sooner or later she does calm down.

I have similar experiences as Murphy and Daybyday have. Some of Bill's hallucinations (all negative and angry) have an actual seed that has created the monster. I try to find the seed by asking a lot of questions, none accusatory in any way. His latest is that he didn't want my aunt (who moved here to help me) to bring all her church people to the house anymore. He said there were 40 people here. After many questions over several days we figured he was agitated over Easter dinner when there were four of us, Bill, my aunt, his son (visiting from out of town) and me. By finding out what may have started the outrageous idea in his head we can try to address that seed using a different approach in the future. Sometimes it's just a crazy story. I'm happy for all those who have pleasant hallucinations. I'm particularly glad that seems to be the majority of experiences.