Hi M.,
My son was having a problem recently with bad dreams, so I told him that he could talk to his bad dreams and he could either change them or make them go away. I also told him that no one really looked like "that" (whatever it happened to be) (For example, "Have you ever seen anyone with a green face, hair that looked like that and those teeth at the store?") I reminded him that people dressed up like silly stuff for halloween sometimes, but those are just costumes. I also told him that monsters are just something big kids make up to scare little kids.
The next night before he went to sleep, I reminded him that if he didn't like his dream, he should say, "Go away yucky dream because I want to dream about ice cream!" (or whatever your child chooses.) It worked! We haven't had a bad dream since. I think it gave him a sense of empowerment -- that he was in control. Good luck, I hope it helps!