If my dog has a bad reaction to a person, I have my suspicions about them... not to say that my dog always makes the right choices.
Dogs are extraordinarily good at reading human beings. I don't by this mean they look at someone and divine there is something wrong with them. Your dog is probably making the 'right' choices about people because it's reading you. Your dog knows you extraordinarily well, and is remarkably attuned to even your very subtle and involuntary body language (there's a lot of experimental evidence of this kind of thing).
But, as I mentioned on the other thread, my dog barks at women standing outside for a smoke. I don't think she's getting that from my body language, nor do I think these smoking women were all secret serial killers, so who knows what's going through the dog's head. She recently started barking nervously at a bench in the distance, but I think that's because her eyes are going with age. She seemed confused what the hell it was.
As for the dogs' reaction, if it isn't a demon then I think you need some explanation
I don't think it needs any particular explanation. Like I said, my dog sometimes reacts inexplicably. Recently, she started barking at a small child sat on a bench across the street. The same way she reacts to someone she thinks is a threat. I have absolutely no idea what was going through her head - being a dog, she's unable to explain what it was about the girl that riled her up.
This story about my dog barking at a random girl will be quickly forgotten and pass out of people's minds, because it's not significant of anything. But imagine if I knew who that girl was, and I discover in a few years that she went crazy and murdered all her classmates. On hearing that news, I might remember that day and my dog's strange reaction. If I was the superstitious sort, I might make a connection, and assume my dog sensed something. With the passage of years and the story of the murderous rampage fresh in my mind, perhaps I will even misremember and unwittingly exaggerate the dog's behaviour; making the event seem even more significant.
But, in reality, there are loads of dogs inexplicably barking at people all the time all over the world, and these incidents are forgotten. Several dogs took a bad shine to me in Mexico for some reason (I remember puzzling at the time what Mexican dogs had against me).
If dogs only barked inexplicably at people who turn out to be axe murderers, then there'd be something to explain. But that's not true - dogs bark inexplicably at loads of people. So if an explanation is needed, it's nothing to do with serial killers.
The same line of thinking applies to the dream you mentioned, I think. There are literally billions of dreams every single day. I don't know about you, but all sorts of weird shit goes on in mine. Even if there is no special meaning in our dreams, the probability that some dream somewhere will seem suspiciously prevalent is about 100%. No explanation is needed. What would be truly mysterious and astonishing, is if, despite humans' natural skills at storytelling and forming connections, people were not finding mysterious meanings and predictions in their dreams.
Some animals have some senses that are far more acute than ours.
I am bothered by this narrative that animals have magical senses; as if humans were walking around blind in comparison to all of our gifted cousins. Every animal has a different suite of senses; and so many animals are of course sensing things we can't. But, equally, we are often sensing things they can't.
Dogs have an enormously better sense of smell than we do, and usually better hearing. But we can see much better than they can, in both dark and light conditions. And we see more colours.