Interesting, we're just studying sleep cycles and sleep stages in my Psychology class. Stage 4 sleep is when sleepwalking/night terrors (not nightmares) occur. Stage 4 sleep happens mostly during the first parts of sleep. REM sleep, dreams, nightmares, occurs during stage 1 sleep. This stage occurs mostly during the later parts of sleep shortly before waking. During this time the brain waves are very similar to that of a fully awake person. However the brain blocks it's link to the body so that the rest of the body is paralyzed. It is impossible then (and probably for good reason) that your body would physically react to dreams.