Freewind: from the look of that scene, I think he was thinking of his love. And his love is a really really big wing monster lol
btw, wat the hell would a guy do while smoking and reading poems?
Hehe...! Yeah, the first time you view this dream, it's not certain you've learned all you can about Iorveth. Once you do, however, it becomes clear that he dreams of being 'king' - most likely a tolerant king, but a king nonetheless. And yes, his love for a certain, fiery lady also becomes apparent at some point - which is why I think what he's saying somehow relates to her, and not necessarily the kingdom he's made.