They remember and the events happened but were reset to just before it, but that still falls well under the "it's all a dream" concept. It's a big fat reset button. A get out of jail free card without having to resolve anything. Disputing it is arguing over semantics, like saying "it was all a simulation" doesn't fall under the it's a dream concept.
How are demon death threats (that he will make good on if prompted) or being stuck in Christmas Hell forever after you've all been killed getting off easy? At best they're scarred for life.
If I was aware that there was a demon goat man wearing someone's face watching me at all times I'd be paranoid for the rest of my life.
If I was aware that there was a demon goat man wearing someone's face watching me at all times I'd be paranoid for the rest of my life.