Great Question--I know that when my students read this book, they get lost in the first third of the book which focuses on the design of Chicago for the fair because they are more interested in the story of the serial killer Holmes. While I certainly understand that, it is important to read the book with the mindset that Larson pairs the two tales to discuss related truths about the White City.
The positive aspect of the White City's dreamlike quality is that it attracted a myriad of new visitors, American and foreign, to Chicago and established a more cultured reputation for the hard-working city (at least for a while). The dreamlike quality which many of the visitors found so appealing stemmed from the architects' decision to build facades which made parts of the city appear to be constructed of white marble--it was a shining city on the lake (of sorts). Because it would have been too expensive and time consuming to rebuild or build new buildings out of marble, the white facades made it possible for the designers to give Chicago the appearace of opulence and elegance.
From a negative standpoint, many newcomers who migrated to the city had heard only of the magnificent white city and the many jobs available because of the upcoming fair. The dreamlike quality drew those naive Americans and foreigners to the city, but unfortunately, they soon realized that it was all a facade--that life was rough and hurried in the city and not what they had expected. This is when Larson introduces Holmes's story. Holmes represents the underlying nightmare or seediness of the city, hidden from the view of unspecting innocents who are drawn in by the city's glow. The architects and engineers who designed the White City had no idea that they were providing criminals and murderers with the perfect cover to carry out their ill will.