Badlands and Flame's Fury respect limits on "What could this Power have damaged?" This may include caps on the number of Invaders being Damaged, or specification of exactly which Invader(s) are to be damaged.
Can Bringer of Dreams and Nightmares do real damage (destroying cities, etc) with Power X?
The answer, in general, is 'no'. If the Power says "damage" or "destroy", it doesn't matter if it also says that Dahan, Beasts, Invaders, or anything else are doing that damage, the source is still ultimately Bringer of Dreams and Nightmares and is only nightmare damage.
This applies even if the power has some other spirit doing something (eg, Blazing Renewal). If Bringer of Dreams and Nightmares played the power, it cannot do real damage.