OK, let me first say that the Lathe of Heaven is one of my all-time favourite books. It made a huge impression on me when I was a kid, and I have always wanted to see a film made of this book.
Next, I am puzzled by the previous reviewer's comments. I really don't think he is being fair to this film. This is a reasonable interpretation of the book, and stands as a film in its own right. It doesn't strike me as a blatant attempt at taking advantage of the book, rather the best they could do within the budgetary contraints. I have seen the original version of this film, in all it's blurry glory, and I do think this version is better.
Granted, they have skipped over some of the more fanciful elements of the original story, but they have kept to the spirit of the book, and this film contains much of the introspective morality tale of the original book.
James Caan is reliably solid as the well-meaning psychiatrist, but I found that Lukas Haas in the lead was not entirely convincing for me.
Overall, I did enjoy this film. As I have said, it is a reasonable version of the book (albeit on a budget I would say). Unfortunatley, it lacked a certain intensity that I found with the book, and it didn't entirely live up to my (high) expectations. Which is why I have given it only 3/5.