Was it a dream?

I think it wasn't, personally, despite the ambiguity and essence of it changing intermittently between believing and not. Hard to say it makes much sense to say it was both? Magic always requires belief. I like to think Santa sewed up the boy's robe since it tears twice.

The way I see the movie, it's a real-dream. The kid is dreaming it all, yet it's placed there by Santa Claus. The bell is real, no one bought it or found it, thus I'd say Santa brought him the bell after he had the boy dream about it.
A train rolling through snowy streets is fine but they have trouble on the ice... there are no mountains due north of the midwest... it's like Santa activated the Matrix or Inception for the children.

...my essential 50 http://www.imdb.com/list/ls056413299/

First the conclusion: real.

I believe the clues that it was a dream were intentionally strewn throughout the film to lead the viewer to believe that this would have a Wizard Of Oz type ending, and indeed it did- right up to the point where the bell could be heard by the children but not by the adults.

Is very bad to steal Jobu's rum. Is very bad.

It's real...to me. As the narrator says at the end "At one time most of my friends could hear the bell. But as years passed, it fell silent for all of them. Even Sarah found, one Christmas, that she could no longer hear its sweet sound. Though I've grown old, the bell still rings for me...as it does for all who truly believe."
And that is how I have felt about Christmas all my life. I am almost 70 years old and I can still hear the bell.