Listen to this episode of Radio Lab - http://www.wnyc.org/shows/radiolab/episodes/2007/05/25 - it talks how, in our dreams, we start to do free association of events that have occurred during the day to make sense of them. Pretty interesting stuff.
intelligence is famously hard to define but I think a big chunk of it is associating ideas. most people have set pathways, x associates with y and so on. the more intelligent cross-reference more things. while you are asleep your brain plays with associations.
I would bet that someone who didn't dream would do substantially worse on cognitive tests of all sorts.
I would bet that someone who didn't dream would do substantially worse on cognitive tests of all sorts.