This episode is inspired by A Nightmare on Elm Street
The plot of this episode and the Bakus feeding off their victim's life is similar to Wes Craven's A Nightmare on Elm Street both plot wise and how the main villain Freddy Krueger, visits people in their dreams and feeds on their fear
Dark, Dire, and Dread Baku's eyes has the same shade of dark red as in Freddy's sweatshirt.
The baku's long claws are also a reference to Krueger's famous bladed glove, Dark uses them to menace his victims more than the other Bakus.
The Nightmare on Elm Street theme plays during the scenes where Timothy is telling the Baku's back story.
Each Baku seems to represent a different type of dream.
Dark Baku is the traditional nightmare
Dire Baku is the type of dream that shows your inner thoughts/fears
Dread Baku is the dream that is the result of "eating something"
Fred Baku is your happy dream
When Timothy was fighting Scrappy with a chainsaw, this is a homage to The Texas Chainsaw Massacre
The episode's ending homages an episode from Buffy the Vampire Slayer series, "Fear Itself", where Gachnar, the fear demon, is revealed to only be a few inches in height in the real world.