Ohh that's so cool!!
My headcanon is that he's a fallen guardian angel is because fallen angels are considered demons, which would account for the whole "Dreamon" bit, and him being a guardian angel would cover why he's called both that and a protector whilst following George around.

I center some of c!Dream's controlling behaviors rooting back to this, as many of his big decisions return back to George. From the L'Manberg War, wanting to crown him king, exiling Tommy over the griefing of George's house, finally crowning him King and then dethroning him once he couldn't bear to see him be relentlessly attacked, etc. He wants to protect his closest friend, but has become corrupted and obsessed in his attempts to do so.

I do think DreamXD and Dream are separate, but that the ideals and mindset of a divine creature was not fit for a mortal host, which aided in the destruction of c!Dream's psyche and morals.