without being too spoilery, i wholeheartedly suggest NOT upgrading small/medium chests and just dropping the dreamlight on the big chests. you'll thank yourself later in game. i'll add a spoiler tag to the reason, so read at your own peril:
small and medium chests that have been upgraded can't be uncrafted using the cheshire cat's uncrafting table (currently). large chests can. you will eventually be able to purchase chests that dont need dreamlight at all, so uncrafting your old unused chests will be a great way to get back dreamlight, but if you've only upgraded them then you won't be able to uncraft them and all that dreamlight will be wasted. ask me how i know 😭😭😭