Someone once said "Actors are good liars, but writers are good liars with good memories."(because they write it down)
I think DREAMS was an effort to write all the lies of O's life down so he wouldn't have to remember them and then destroy any paper work that would shed light on his true life.
That's the best explanation I have yet heard. And the other clever tactic: Place everything into the mouth of others. He never tells us anything himself, it can all be explained away by 'that's what they told me' - the only time he speaks in his own voice is when Ayres gives rein to his musings and metaphores.