Haha this topic could get pretty deep. LA is one of my favorite Zelda games. I think when you're asking this question, you have to define what your perception on reality is. I feel like according to what the Wind Fish said, Koholint was real at one point. By real, I mean that anyone could access it. Yes it may be a dream of his, but in terms of mankind, what is real to us is that what we an touch, feel see and live in. Koholint was a fully working society filled with several different species, forms of food and drink and habitats. Link may not have been the only visitor, and because of that, we cannot be sure if it was all in his head. I feel, however, that what the Wind Fish alludes to is that that island will be a legend. I think the real question is what the Wind Fish is capable of creating and to what degree he can do so. If he created all that is Koholint, then is he not considered a God? His power would rival that of the three Goddesses who created Hyrule. What exactly makes him different? And knowing that, who's to say that Hyrule is nothing more than a dream thus making Koholint a dream within a dream. Haha I'm going to stop rambling now. But, given the information at hand and comparing Hyrule and its creation to Koholint and its creation, I feel Koholint was, what we would consider, real and thriving.
