In "La Belle Dame sans Merci", what is the significance of the knight's dream regarding the knight's fate in the poem?
In Keats's poem, the dream may have multiple meanings, especially in terms of the knight's fate. First, there are class implications. The other men he dreams of share similar elevated positions in society. That they have all been decimated (with death-like imagery) by a woman outside that social class could be a commentary on on class in Romantic England. You'll have to decide if there's enough evidence for this reading in the text.
The dream also indicates, because the knight is not alone in his experience, the effects of unattainable love on men. The otherworldly quality of the "imp," or "elfin" lover points to the fact that whether it's in a positive way (she represents all that love could be) or in a negative way (she represents an Eve-like temptress common in literature), the woman does not exist in the same realm as the knight. There love does not exist on a common plane, and they cannot share it outside this dream-like meeting. It dies on the side of the hill, leaving the knight irrevocably changed.