Considering that just a year before in 1908 Segundo de Chomón had been innovating with his closeup work and using stop-motion animation to create new effects, "Sweet Dreams Intermingled with Nightmares" is not an especially innovative work with its stagy long shots and elaborate stage sets. Knowing Chomón, you would expect a film of this date to be a little more innovative with effects work, and expect a less stagy atmosphere when compared to earlier works. Yet, even despite the staginess of the short, it is definitely an improvement when you consider the obvious effort that was put into the nice visual look.
"Sweet Dreams Intermingled with Nightmares" takes a very common and well-practiced concept utilized all the way back in the 1890s: dreams. The first "dream" films, that is, films in which the main character experiences a dream disrupting their sleep, were first made by (quite predictably) Georges Méliès. Méliès was the competitor of Chomón and the innovator of many of the film effects we use today: stop-motion, superimpositions, dissolves, etc. Because Chomón started filmmaking at a much later date, he learned of Méliès's wonderful movies--among the best of the period--and, while moving with the advancements of filmmaking, took them and remade them in much better ways. (Méliès, unfortunately, was not like his competition and continued to do the same things he had began with all the way back in 1896, without changing with the times). "Dream" films, being one thing his competition had already done, were among the concepts Chomón improved upon--and in this 1909 film, he does a more visually elaborate--though not structurally elaborate--job in making a better work.
The short takes place by a pond outdoors. As the other reviewer has already pointed out, Méliès did not hardly ever shoot outdoors, so that is already an innovation of sorts--though not really uncommon when you look at what other filmmakers were doing. A woman, played by Julienne Mathieu the director's wife, falls asleep on a park bench and has two dreams. In the first, she is transported to a dark cavern where strange goblins with oversized heads--which are impressively crafted head-pieces--roast her over a fire. Waking up, she is unhappy and then sleeps and dreams once more, this time entering a beautiful place, where she meets a handsome prince. There is a small laugh at the end to conclude the story.
As the other reviewer pointed out, the sets in this film are a definite improvement over Méliès's, which were usually cheaper due to his films being on a smaller budget. Pathé Frères, the company for which Chomón worked, could afford much fancier sets and costumes to create a much more elaborate visual look. (For example, Méliès could never have afforded those huge head-pieces). The superimposition effects are also an improvement over the competition--if Méliès had been doing them, they would have been sloppier and shook around a lot more on the screen. As I pointed out, for a 1909 film Chomón still does stick to stagy long shots with no closeups which he had worked with before--but this can be overlooked since there wasn't any particular need for them anyhow. All in all, longer, more visually impressive, and just more complex in general (especially for a dream film). A definite elaboration on Méliès and much thus nicer to watch.