Still broke the suspension of disbelief for me atleast, because it's something from our time and although it does look futuristic, it looks out of place because it's so easily recognizable. They must be low on budget for a proper prop.

Close, but I believe that Sarah wishes for Three to be in that simulation with her; kill his physical form, and have his brain scan uploaded into the computer.

This is just my take on it.

Sara is a difficult character to figure out. She's clearly not happy being stuck in a spaceship computer, but she hasn't voiced any desire to try and escape. It makes me think she might try to draw Three in at some point, permanently. She said it herself to Two, companionship is the thing she misses most.

At some point they're going to have to try and find a way to get her out of there, or it will get awkward.

He apparently did.

If the simulation to access prior memories requires the target to enter a dream state, they wouldn't be able to read. Our brains turn off the logic centre responsible for reading when we enter dreams.

Not true. I first saw this theory in an old Batman episode, and believed it myself for many years. However, experiments with lucid dreaming have shown me it's entirely possible to read in a dream. Just today I had a dream where I read some words on a computer screen (I am a nerd and have nerd dreams).

When you see text in dreams, your brain basically fills in the blanks with random words. As you said, the logic center is turned off so it's not going to be coherent. Sometimes it just happens to make sense, other times it's pure gibberish. Today, the words I read didn't make sense. If I had been in a bit deeper sleep I might have triggered a lucid dream state, but since I was just dozing I kind of went "wtf" and woke up.

So what we saw in the show was nearly accurate, but I believe it would have been real words he saw instead of lorem ipsum.