OK, new theory:
Iris was a human youth from the beginning, who stumbled upon (or was contacted by) Esurio. Esurio might be Jimbo's version of my own "dream-universe"'s Dream Lord, the Supreme Dreamer, or he may simply be a VERY powerful Dreambeing... She makes a wish: To become a dreambeing herself! And, for some unknown reason, Esurio grants it. Maybe he owe something to her? Anyways, she becomes a Dreambeing, but finds herself less than satisfied. She is now trying to reconnect into the real world by means of "rooting" herself upon Colby.
Seems to tie up the loose ends, doesn't it? I think it does. *proud of myself*
And, BTW, all strange effects we are watching is simply the bending and deforming of reality which occurr when the Barrier between Dreaming and Waking is breached...