A 67-year-old man talks in Spanish in his sleep. This doesn't seem weird at all. But take into account that he has forgotten almost all his Spanish, which he learned as a child until the age of 10, when he moved to the Netherlands and started learning Dutch and other languages. He says that Spanish is the only language he was ever fluent in but now all that is left of it is only in his dreams. (link to article below)
In Korea, dreaming in English is people's "dream." They think that if they dream in English, it means that they have achieved a significant level in English. This doesn't seem totally nonsensical, so I wanted to find out how much correlation, if any, there is between dreams and language ability.
Steve Kaufmann, author of The Linguist, founder of thelinguist.com, and speaker of nine languages, offers his opinion on the topic: "In my experience it does not mean much. It sometimes happens to me, I think it reflects the fact that we are really committed to the language, listening to it, and wanting to speak it. In our dreams we are not inhibited so we do well." In an online forum (http://forum.wordreference.com/archive/index.php/t-245778.html), people seem to share the opinion that dreaming in a foreign language doesn't mean you have the language down solid. Citing their experiences, they seem to agree with Kaufmann that people dream in the foreign language when they're studying it intensely.
Other than other personal accounts, I couldn't find any research that pointed to a correlation between dreaming in a foreign language and ability in that language. Apparently, we're "smarter" when we're asleep, so we can speak the foreign language better in our dreams. However, some people have experiences of dreaming in a language they never learned, which they perfectly understand while they're asleep. A lot of sites that I came across as I researched this topic were about interpreting dreams, premonitions (dreams predicting the future), and sleep disorders like somniloquy (sleep talking). So it seems that a lot of the dream world is unknown, because we do things in our sleep that seem unexplainable like carrying out a conversation with someone.
As for me, I don't think I'm very conscious about which language I dream in, but I do find it odd when my English-speaking friends and my Korean-speaking friends come out together in my dreams and seem to communicate perfectly with each other. I think I've had dreams where I understood French perfectly, but the memory is vague, so I'm not really sure. My roommate tells me I sometimes say random words in Korean while I sleep, but as she doesn't know Korean, I'm not sure if it's just gibberish or actual Korean. Although I didn't find any substantial evidence, the majority opinion seems to be that one's actual ability in a foreign language and dreaming in that language have little correlation. Just because you dreamt in German, that doesn't mean you've achieved fluency or even proficiency in it.