You have two things going on: a flashback from the main narrative, and a dream.
If the dream is taking place in the past, that may be a literal flashing-back, but it's not actually a flashback. A flashback is reliable (in the sense of "reliable narrator"), realistic, and a memory of someone. It's a detour from the forward narrative.
A dream, on the other hand, can take place at any spot in the timeline, or several over the course of a dream. It can be reliable or unreliable, realistic or fantastic, true events or imaginary ones, memory or imagination.
Remember that dreams rarely have coherent narratives, unless it's a "lucid dream," in which case the dreamer knows she's dreaming. Dreams are full of symbols and are often non-linear. The POV changes, the dreamer changes character (that is, she starts as watching the events and then becomes part of them, and then becomes someone else in the same dream), physics are ignored, etc.
So first off, decide whether you are introducing your character's past as a dream or as a flashback.
If it's a dream, then it depends what you want to accomplish with it.
Do you deliberately want to mislead the reader for the shock value? Will the dream be so close to reality that the differences start subtle and slowly grow, until it's clear that something has gone horribly wrong, and then the dreamer wakes up?
If you don't want to mislead the reader, putting the text in italics will quickly signal that the text is outside the main narrative. You don't need to do anything else to introduce the idea that "this is a dream." The italics will alert readers that something's going on, and they'll figure out pretty quickly that it's a dream rather than reality.
Making the reader angry or confused is a product of the actual story — that is, did the technique work, or did it just piss me off? — so we can't comment on that until we see it.