Art by smbc-comics
Consciousness is often said to disappear in deep, dreamless sleep. We argue that this assumption is oversimplified. Unless dreamless sleep is defined as unconscious from the outset there are good empirical and theoretical reasons for saying that a range of different types of sleep experience, some of which are distinct from dreaming, can occur in all stages of sleep.
Pubmed Articles
Does Consciousness Disappear in Dreamless Sleep?
Sciencealert Article We Were Wrong About Consciousness Disappearing in Dreamless Sleep, Say Scientists
There was a case of a guy, where they botched the anesthesia, and he was just paralyzed but conscious the whole time during some invasive surgery. They realized their mistake, and tried to fix it by giving him some amnesic so he wouldn't retain the memories.
After getting discharged, he wouldn't remember anything... but kept having nightmares, and a few weeks later took his own life.
So it seems like memories don't need to be fully formed to mess one up.
That sounds like the mechanism might be different though, but yeah some percentage of people wake up during surgery while the paralytic is still in effect, they closely monitor the heart rate for sudden spikes because of this I believe. It sounds horrifying to me, but then I remember that there was a time when anesthetics didn't exist.