He didn't. The idea came afterwards, and when it was suggested to him he did not deny it. He may have just been in Showman Mode at that point, however, happy to accept anything that would allow for the broadest possible acceptance/audience. But there is no proof that SL actually went into the project with the dream/reality concept in mind.
Please give me a full citation, chapter and verse.
In the same book, Kaminsky also comments on why, if it is supposed to be a dream, real objects from the future were used: "Is the whole tale an opium dream by Noodles - a dream in which what he projects as a wasted life will be justified in the future, in which, in fantasy, he will discover that he did not betray his friends at all but was, himself, the tragic victim who becomes the tragic hero? A problem with this, though it is a possibility favored by the director, Leone, is that the period information in 1968 is contextually specific. In a novel, the illusion might well carry. In the film, we see television, 1968 automobiles, 1968 clothing, a frisbee, etc. The information is not a distortion alone, but if it is an opium fantasy, then it is the fantasy of a seer. We might also argue that we are dealing with a problem of convention. The fantasy of the future will lose the context of assumed naturalism of that future (which is, in this case, 1968, our past) which deviates from our experience of that world. Simply put, we have a sense of what existed in 1968. Were that to be confounded in a projection clearly seen as fantasy from 1933, it would change the genre of perception. Note, for example, the odd sensation of examining the "future" in a film that is now past. Just Imagine, Things to Come, and The Time Machine - all three predict a future that did not come to be, but that was in the realm of science fiction. What, as in the case of Once Upon a Time in America, do we do if we do not want to deal with the assumption of how the future will look to someone fantasizing in 1933."
Chapter 3 of the 1985 edition of Kaminsky's American Film Genres. The chapter is entitled 'Once Upon a Time in America as Narrative Model." I don't own the book, but I printed this chapter from it years ago.http://www.worldcat.org/oclc/10850494