Dream vial (herb) is obtained in the Dream Mentor by adding goutweed to the dream vial (water).
To make the dream potion, the dream vial (empty) must first be filled with water to create a dream vial (water). Goutweed must be added to create a dream vial (herb). Finally, add ground astral rune to complete the potion.
With the potion, Cyrisus and the player travel to Dreamland in Dream Mentor and sort out Cyrisus's fear of combat, where the player faces high-levelled monsters representing that fear.