From my book, p157-8:
[In the summer of 1907] Barrie was making numerous notes on Michael. Some of these appear to have been for a sequel to Peter Pan about Peter's brother, "Michael Pan". It never got much further than the title, perhaps because by this time Barrie had begun to incorporate elements of Michael's character into Peter Pan himself as he developed the book, Peter and Wendy:
"Sometimes [...] [Peter Pan] had dreams, and they were more painful than the dreams of other boys. For hours he could not be separated from these dreams, though he wailed piteously in them. They had to do, I think, with the riddle of his existence. At such times it had been Wendy's custom to take him out of bed and sit with him on her lap, soothing him in dear ways of her own invention, and when he grew calmer to put him back to bed before he quite woke up, so that he should not know of the indignity to which she had subjected him."
In reality it was Barrie who fulfilled Wendy's role with Michael. He later wrote a short story about him, Neil and Tintinnabulum, which is as intimate as it is unknown, in which he elaborated on the nature of Michael's nightmares, referring to the boy as "Neil':
"There was a horror looking for him in his childhood. Waking dreams we called them, and they lured Neil out of bed in the night. It was always the same nameless enemy he was seeking, and he stole about in various parts of the house in search of it, probing fiercely for it in cupboards, or standing at the top of the stairs pouring out invective and shouting challenges to it to come up. I have known the small white figure defend the stair-head thus for an hour, blazing rather than afraid, concentrated on some dreadful matter in which, tragically, none could aid him. I stood or sat by him, like a man in an adjoining world, waiting till he returned to me, for I had been advised, warned, that I must not wake him abruptly. Gradually I soothed him back to bed, and though my presence there in the morning told him, in the light language we then adopted, that he had been "at it again" he could remember nothing of who the enemy was. It had something to do with the number 7; that was all we ever knew. Once I slipped from the room, thinking it best that he should wake to normal surroundings, but that was a mistake. He was violently agitated by my absence. In some vague way he seemed on the stairs to have known that I was with him and to have got comfort from it; he said he had gone back to bed only because he knew I should be there when he woke up. I found that he liked, "after he had been an ass," to wake up seeing me "sitting there doing something frightfully ordinary, like reading the newspaper," and you may be sure that thereafter that was what I was doing [...]
"What is the danger? What is it that he knows in times during which he is shut away and that he cannot remember to tell to himself or to me when he wakes? I am often disturbed when thinking of him (which is the real business of my life), regretting that, in spite of advice and warnings, I did not long ago risk waking him abruptly, when, before it could hide, he might have clapped seeing eyes upon it, and thus been able to warn me. Then, knowing the danger, I would for ever after be on the watch myself, so that when the moment came, I could envelop him as with wings."
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Daphne du Maurier also talks about Michael's nightmares on the audio section of this website.