While it's not what actually happens, it makes sense that Nick would dream about this because in the pilot episode, Adalind does the same thing to him (although she was attempting to do it to his aunt). There's even a flashback to that scene in "Love Sick."
According to the deleted scene, it would seem that Nick subconsciously thinks that Adalind will go on stabbing people with needles, but what actually happens is beyond the scope of his nightmare.
