You have only written a few short paragraphs but based on that limited amount of information, nothing that you have written would normally be associated with a mental illness. You are basically describing experiencing a very short memory.
Some people have no memories whatsoever of their dreams. Most people however can remember some dreams, sometimes. Those who remember their dreams, even partially, will tell you that their dreams often occur in places that they have never been to in real life and include people that they do not know in real life.
They, like you, remember people and places that they have experienced only in their dreams. These memories are not illusions nor delusions, simply because they are not based on every day, real-world experiences. They are memories and valid as such.
We all, roughly, spend one third of our lives sleeping and dreaming. This is a significant portion of our entire life. The importance of dreaming has been well-established in scientific research. Allowing someone to sleep but awakening them when they begin to dream and thus depriving them of dreamtime, will eventually lead to their dreaming with their eyes wide open and thus dreaming while awake or conscious. When deprived of dreamtime people become unstable, emotional and sometimes violent.
It is not my place to interpret or to conclude the meaning of sleep research. However, it is very safe to say that dreaming is very important, though not well understood. You have not confused real life memories from non-real-life memories. If you had done so or were to do so, this thinking would fit the more standard definitions of illusions and delusions. If, this simple answer to your question, ends your panic and crying, then all should be well. If the knowledge that I have provided, does not end your panic attacks then you should consult a mental health professional. Dreams can be experientially, as real as life. You dream with all five senses just as you experience life with all five senses.
Memories of non-real-world things, are not a problem since they could be no more than memories of experiences in your dreams. Having panic attacks, for whatever reason, is never desirable or acceptable. If the panic attacks continue, you must see a qualified therapist. If the small amount of information that I have provided you is sufficient to end the unpleasantness that arises from your memory of this place, then all should be well. Good luck.
Dr. Kristina Randle