The question body emphasizes the question whether Domhoff's neurocognitive theory of dreams is reliable.
Reliability is the "consistency" or repeatability of research measures. So, a theory cannot be reliable.
I think OP (since offsite) meant to ask for the theory's validity, being the extent to which a concept, conclusion or measurement is well-founded and corresponds accurately to the real world. This interpretation also matches the question title better.
Domhoff (2001) bases his theory on findings in patients with brain injuries, showing that lesions in different areas have differential effects on dreaming. In addition, only 20–30% of REM period awakenings in children aged up to 9 years lead to dream reports and dreams of children under age 5 yrs are bland and static in content. Thirdly, Domhoff showed that dream content is repetitive and continuous with waking conceptions and emotional preoccupations. Based on these findings, Domhoff says that dreaming is best understood as a developmental cognitive achievement that depends upon the maturation and maintenance of a specific network of forebrain structures.
Domhoff's theory opposed the activation-synthesis theory theory, which was coined by Hobson & McCarley. They showed that the brain stem was activated during REM sleep. Their theory suggests that during REM sleep, random brain activation produces dreams. The theory has since been developed, as more and more is understood about REM sleep. Hobson has explicitly argued against Domhoff's theory, stating that Domhoff bases his theory on a 'misreading of the neurobiological literature and an individualistic view of dream psychology' (Hobson, 2005).
In the end, theories try to explain observations, and at this point, as far as I can see, both theories may have value. Personally, the activation-synthesis theory seems more plausible and less complicated, and hence the most parsimonious of the two. But admittedly, I'm not a dream expert.
Fig. 1. Activation-synthesis theory of dreaming. source: MacAlister College
- Domhoff. Dreaming (2001); 11(1), 13-33
- Hobson, Dreaming (2005); 15(1), 21-29