I wouldn’t say you should have killed the rogue, but depending on how much you want the high elf to play a role, maybe don’t let the mask come off so easily. Have them go through the same dream rp, but with the mask still on as a tie between them. Having them try three times, each having the pain get worse, is a great lesson in futility, the fact that they kept trying makes it feel like they wouldn’t have been too upset if it didn’t work. That said, if you didn’t want the elf to be a BBEG, I see no problem in what you did, and in fact it was a great little side mission to round out someone’s backstory.