Lava does not deal damage while waiting in it, nor while teleporting in. The invisible wall past the endless lava sea seems a bit unnecessary-- if you made the map a little bigger you'd run out of mana and die before too long. It seems extra unnecessary given the *visible* wall past the endless lava sea that you can't reach because the invisible wall is before it. Also the visible wall past the invisible wall in the endless lava sea doesn't block LoS so you can see the lava continuing behind it.
Dream costs too much mana to cast. Maybe you can cast it if you kill every skeleton on the world map but I got pretty up there on mp/levels and I couldn't ever cast it. The trick, if it is even possible, is to kill all of the skeletons without letting any die to lava. This is, of course, pretty luck-based but if you get a feel for the generation patterns and stuff you can do pretty okay at it. I got 16 max mp (I think actually 18 but I'm not sure and I know for sure 16) and I felt like that was probably a bit more than half the skeletons. It's probably not possible to level up enough to cast Dream.
Dungeons are a death trap. Once you enter you can't ever leave-- there's no 'up' stairs. There are also no skeletons, so no xp, so no chance at casting Dream. There might be something interesting through the walls, but since pickaxes don't stack or possibly don't do anything, cutting through all that solid rock is way too much of a pain for me to check. Thunderwave's damage is unresisted, though, so if you find a way to regen mana *besides* levelling up that would make it much more feasible. To avoid dungeons, you have to not step on any entrances (grey triangles)-- you automatically go down if you do.
Trees are fine to cut down, especially once you have a few knives under your belt. Rocks are okay if it's just one or two, but are a real pain in groups. Solid rock takes a *long* time to hack through, and knives hardly make much of a difference. Water is safe, lava is 10 damage aka death.
Skeletons basically can't hurt you after 2 shields, and I've never even once been hit at 5+.