I guess they just never updated Yugi's dialogue, as in the anime, Judai and Yugi knows each other quite well, having been "tied" with each other through the Winged Kuriboh card.
It wasn't a dream. It was the last episode of season 4. We just don't know the true winner because it ended after Yugi summoned Slifer. Then it cut to Jaden leaving on a different adventure and he mentions the duel at the end of the episode.