Confused about the hotel scene near the end (spoilers)

So I understand mostly everything about the ending (I think). Taeko ending up being Sayori, the mother, and Yuji was Mitsuko, the daughter. Sayori became delusional and convinced herself that she was actually Mitsuko to escape from the guilt of nearly killing her over an earring.

The part that confused me though is the scene where Taeko again wakes up in the hotel with Yuji, right after Yuji (Mitsuko) explained to her how she became delusional and all that. Taeko starts freaking out and yelling at Yuji, saying that he must have seen her without the wheelchair once and that's how he knows. In the meantime, Yuji is denying there ever having being a wheelchair. And then it snaps back to the chainsaw dismemberment scene, and Yuji (Mitsuko) remarks "Now which one is the dream?"

This is the part that's confusing me. I took the chainsaw dismemberment scene to be reality. What was up with that dream sequence in the hotel room? Was it even a dream? Or was the chainsaw bit a dream? If the hotel part was just a dream, how did Yuji know what she was dreaming? Both of those realities cannot be true.

So that leads me to believe the hotel scene was actually not a dream, but the chainsaw part was, otherwise Yuji wouldn't have even known about the hotel dream. But then this completely distorts my previous understanding of the movie. So was it all just a delusional dream from Taeko at the hotel, and she's really not Sayuri after all? Man I'm so confused! Why was that dream bit in the hotel even added, I just don't get it!

Please someone clear this up for me!