Acetylcholine plays an important role during REM Sleep. I cite an answer to the question "Why do dreams lose clarity quickly over time after we awaken?":
Activity in the PFC during sleep may be modulated by levels of acetylcholine, dopamine, and other neurotransmitters.
See references and links there. Nicotine also binds to ACh receptors.
Are there studies on the effect of nicotine patches worn while sleeping on dream vividness and dream recall?