(Spoilers) The Dick Van Dyke Show episode "It may look like a Walnut" was one of a few 'dream-themed' episodes. I don't remember all of the details, but in the dream, Danny Thomas (as himself) is really an alien from a planet filled with walnuts. They don't have thumbs, but have four eyes (literally). I think they were supposed to change all humans into aliens like them. It was a little like "Invasion of the Body Snatchers".
If you are reading this review and have never seen the episode, I'm sure the plot sounds completely ridiculous and silly, but it is so well done, that it actually comes off as being very scary! No real special effects are used or needed. Rob's reactions to seeing the mutations are very convincing. At some point, everyone has been transformed except Rob, giving the viewer a feeling of isolation, which is usually associated with real nightmares.
This episode does an excellent job of creating a 'nightmarish' feeling, with its eerie background music, deep black and white image, and convincing performances by all, including special guest star Danny Thomas. Its as creepy as any of the best classic Twilight Zone episodes, and in fact is more effective, because we are so familiar with the characters involved.
In the episode's conclusion, Rob is awake with Laura, who states that she had just had a nightmare as well. I always have a feeling of relief, just like waking up from a real nightmare.
Oh, and the episode also has some very good funny moments as well. A perfect blend of humor and horror!