That follows, and also conforms with the notion that 'real people' should appear as realistic as possible in stories, and the photograph in Pickman's Model is exactly that.
I see what you mean, that the appearance of Ghouly-Pickman in Dream-Quest doesn't mean Pickman's Model is somehow transformed into a dream cycle story.
I wasn't confused by inclusion in that edition of stories (I don't have it), but in the case of Sarnath, I had just finished Quest of Iranon, which is fantastical, and makes a lot of references to dream lands place names:
"I have seen Stethelos that is below the great cataract, and have gazed on the marsh where Sarnath once stood. I have been to Thraa, Ilarnek, and Kadatheron on the winding river Ai, and have dwelt long in Olathoë in the land of Lomar."
Given the fantastical references in Doom that Came to Sarnath, and really no hyper real presentation of real people (like in Pickman's Model) anchoring our perception, I could imagine Sarnath could comfortably rest in the past of the dream world. Or if these two stories are paired together because of the references, is Quest of Iranon then a 'distant past' story?