It used to be that dreams in of themselves were like divinations. Morphos offered hope and counsel, he would keep nightmares in a loop so that counsel could be delivered to wayward minds that had not been mutated in manners like the Mindflayers. His dreams serve to nudge people to reach for their desires in different ways. The effects were similar to divinations, but more subtle and less intentional on the individual's part.
He provided humanity ways to share dreams safely together, like playing dragon, but never actually hurting anyone in the process. It makes for a great halloween trick and in this way, kids can explore their interests safely. It was even one of his Quori's assignments to stop good psionics from accidentally using their mental powers when subconscious "urges" arrive.
His death reintroduced nightmares from beyond the stars - a veritable pandoras box with monsters that can CONSUME magic. But just like pandoras box, there is hope sealed inside. The various libraries of dreams have found their way to the material in mysterious places locked behind mysterious access keys. Some of these pockets would cause pcokets of possibly wild magic that doesn't belong and could run unchecked, like a flower field in the Underdark that still blooms with no light at all.
Eternal Dreamscapes
Eternal Dreamscapes existed back then - one of which were "libraries" maintained by circles of Morphos and overseen by a Gerolai Quori. These libraries were culminations of human knowledge and experiences which could assist visiting humans in catching up to Elves in ways human bodies never had time for. This was a means of learning faster so people knew how to reach for their desires.
There were also some schools which had the luxury of being dreamscapes to avoid harm. In this way, there's an irony that humans could safeguard their short lives better than long-lived Elves. It could assist kids in exploring their interests/futures in "NOT dragon-shaping" ways. This form of schooling would be cost effective, and by the time they're adults they would know what they want to do and how to do it. In this way, education was idealized - saving humans from much of the common strifes they now suffer in Morphos' absence.
The constant optimism an hope probably meant that despite the extra safety netting, people ventured out more and who knows what became of their stories then? The population would not skyrocket too much from lack of death.
There were Morphos-blessed lands and trees emitting illusion alter self fields, within which humans and other races could embody/become hybrids of countless combinations - enabling a more diverse ecosystem/community. This made it so that whenever such creatures left their lands, though, they also lost their transmutations or alterations. This left some humans feeling like staying in their homeland, but fosters ideas of what could be brought in from the outside world past their illusory lands to "realize/actualize" their fantasies. Since humans are so adaptable, if they like their dream enough and want to see the world, they would find ways to carry their dreams with them. This created incentives for trade, adventuring, quori companionship, and so forth.