diff --git a/CHANGELOG.md b/CHANGELOG.md
index f23a7f5858f..bcb42da49e5 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -20,6 +20,8 @@ Docs: https://docs.openclaw.ai
 - Agents/context + Memory: trim default startup/skills prompt budgets, cap `memory_get` excerpts by default with explicit continuation metadata, and keep QMD reads aligned with the same bounded excerpt contract so long sessions pull less context by default without losing deterministic follow-up reads.
 - Matrix/commands: skip DM pairing-store reads on room traffic now that room control-command authorization ignores pairing-store entries, keeping the room path narrower without changing room auth behavior. (#67325) Thanks @gumadeiras.
 - Memory-core/dreaming: skip dreaming narrative transcripts from session-store metadata before bootstrap records land so dream diary prompt/prose lines do not pollute session ingestion. (#67315) thanks @jalehman.
+- Agents/local models: clarify low-context preflight hints for self-hosted models, point config-backed caps at the relevant OpenClaw setting, and stop suggesting larger models when `agents.defaults.contextTokens` is the real limit. (#66236) Thanks @ImLukeF.
+- Dreaming/memory-core: change the default `dreaming.storage.mode` from `inline` to `separate` so Dreaming phase blocks (`## Light Sleep`, `## REM Sleep`) land in `memory/dreaming/{phase}/YYYY-MM-DD.md` instead of being injected into `memory/YYYY-MM-DD.md`. Daily memory files no longer get dominated by structured candidate output, and the daily-ingestion scanner that already strips dream marker blocks no longer has to compete with hundreds of phase-block lines on every run. Operators who want the previous behavior can opt in by setting `plugins.entries.memory-core.config.dreaming.storage.mode: "inline"`. (#66412) Thanks @mjamiv.
 
 ## 2026.4.15-beta.1
 
diff --git a/extensions/memory-core/src/dreaming-phases.test.ts b/extensions/memory-core/src/dreaming-phases.test.ts
index ce5f97ce1cc..8b171c98348 100644
--- a/extensions/memory-core/src/dreaming-phases.test.ts
+++ b/extensions/memory-core/src/dreaming-phases.test.ts
@@ -27,6 +27,11 @@ const LIGHT_DREAMING_TEST_CONFIG: OpenClawConfig = {
           dreaming: {
             enabled: true,
             timezone: "UTC",
+            // The existing tests in this file were written when "inline" was the
+            // default storage mode and assert against `memory/<day>.md` directly.
+            // Pin the storage mode explicitly so they keep covering inline mode
+            // after the default flipped to "separate" in #66328.
+            storage: { mode: "inline", separateReports: false },
             phases: {
               light: {
                 enabled: true,
@@ -305,6 +310,10 @@ describe("memory-core dreaming phases", () => {
               config: {
                 dreaming: {
                   enabled: true,
+                  // This test asserts inline-mode side effects on the daily
+                  // file; pin storage explicitly after the default flipped to
+                  // "separate" in #66328.
+                  storage: { mode: "inline", separateReports: false },
                   phases: {
                     light: {
                       enabled: true,
diff --git a/extensions/memory-core/src/dreaming.test.ts b/extensions/memory-core/src/dreaming.test.ts
index dd38bc10f1e..f2386a200cc 100644
--- a/extensions/memory-core/src/dreaming.test.ts
+++ b/extensions/memory-core/src/dreaming.test.ts
@@ -184,7 +184,7 @@ describe("short-term dreaming config", () => {
       maxAgeDays: 30,
       verboseLogging: false,
       storage: {
-        mode: "inline",
+        mode: "separate",
         separateReports: false,
       },
     });
@@ -223,7 +223,7 @@ describe("short-term dreaming config", () => {
       maxAgeDays: 30,
       verboseLogging: true,
       storage: {
-        mode: "inline",
+        mode: "separate",
         separateReports: false,
       },
     });
@@ -259,7 +259,7 @@ describe("short-term dreaming config", () => {
       maxAgeDays: 45,
       verboseLogging: false,
       storage: {
-        mode: "inline",
+        mode: "separate",
         separateReports: false,
       },
     });
@@ -294,7 +294,7 @@ describe("short-term dreaming config", () => {
       maxAgeDays: 30,
       verboseLogging: false,
       storage: {
-        mode: "inline",
+        mode: "separate",
         separateReports: false,
       },
     });
diff --git a/extensions/memory-core/src/dreaming.ts b/extensions/memory-core/src/dreaming.ts
index 739b7f8cca5..68172ec25e7 100644
--- a/extensions/memory-core/src/dreaming.ts
+++ b/extensions/memory-core/src/dreaming.ts
@@ -615,7 +615,7 @@ export async function runShortTermDreamingPromotionIfTriggered(params: {
         bodyLines: reportLines,
         nowMs: sweepNowMs,
         timezone: params.config.timezone,
-        storage: params.config.storage ?? { mode: "inline", separateReports: false },
+        storage: params.config.storage ?? { mode: "separate", separateReports: false },
       });
       // Generate dream diary narrative from promoted memories.
       if (params.subagent && (candidates.length > 0 || applied.applied > 0)) {
diff --git a/src/memory-host-sdk/dreaming.test.ts b/src/memory-host-sdk/dreaming.test.ts
index bbf51f45471..37410e96885 100644
--- a/src/memory-host-sdk/dreaming.test.ts
+++ b/src/memory-host-sdk/dreaming.test.ts
@@ -90,6 +90,31 @@ describe("memory dreaming host helpers", () => {
     });
   });
 
+  it("defaults storage mode to separate so phase blocks do not pollute daily memory files", () => {
+    const resolved = resolveMemoryDreamingConfig({
+      pluginConfig: {},
+    });
+
+    expect(resolved.storage).toEqual({
+      mode: "separate",
+      separateReports: false,
+    });
+  });
+
+  it("preserves explicit inline storage mode for callers that opt in", () => {
+    const resolved = resolveMemoryDreamingConfig({
+      pluginConfig: {
+        dreaming: {
+          storage: {
+            mode: "inline",
+          },
+        },
+      },
+    });
+
+    expect(resolved.storage.mode).toBe("inline");
+  });
+
   it("applies top-level dreaming frequency across all phases", () => {
     const resolved = resolveMemoryDreamingConfig({
       pluginConfig: {
diff --git a/src/memory-host-sdk/dreaming.ts b/src/memory-host-sdk/dreaming.ts
index 177d8540acc..aea9e95f783 100644
--- a/src/memory-host-sdk/dreaming.ts
+++ b/src/memory-host-sdk/dreaming.ts
@@ -12,7 +12,7 @@ import {
 export const DEFAULT_MEMORY_DREAMING_ENABLED = false;
 export const DEFAULT_MEMORY_DREAMING_TIMEZONE = undefined;
 export const DEFAULT_MEMORY_DREAMING_VERBOSE_LOGGING = false;
-export const DEFAULT_MEMORY_DREAMING_STORAGE_MODE = "inline";
+export const DEFAULT_MEMORY_DREAMING_STORAGE_MODE = "separate";
 export const DEFAULT_MEMORY_DREAMING_SEPARATE_REPORTS = false;
 export const DEFAULT_MEMORY_DREAMING_FREQUENCY = "0 3 * * *";
 export const DEFAULT_MEMORY_DREAMING_PLUGIN_ID = "memory-core";