Good or bad magic powers?

Only one way to find out!

(It's good powers. When he fires an arrow, it lights itself on fire as it flies through the air.)

This is almost compensation for the golden pants stuck to his legs. Almost.

After some more travel - and a great many monsters - he'll see this in the distance.

What is that, a whole town of them? He's getting the hell away from here. Run in a slightly different direction?

Or - wait.

It is not that large of a village.

He can see one of them sleeping in its bed.

He can surprise them with his magical bow and flaming arrows.

Why is he not just going to kill them and take their stuff?

Is he... seriously worried about ethics?

They're not actually sentient. This is a dream, realistic though it may be, and it does not matter if he kills figments of his imagination. Besides, they'd probably want to kill him.

No, brain, he's not going to check if they're going to kill him first! That would give them time to sound the alarm and take away his element of surprise!

But they could be potential allies?

This is blatant rationalization because you're too weak to kill imaginary people. What kind of a lieutenant governor is too scared to kill parts of his own brain?

Fine! He'll break into one house, surprise the sleeping person, give it an opportunity to cooperate, and then kill it only after it inevitably tries to kill him. Even though this risks his own life and is objectively stupid.

He sneaks in through the door of the closest house, and boards up the door and windows.

Come on, look at this cute little villager? You don't want to kill it, do you?

"Get up," he whispers to it.

No response.

"Get up," he snarls, a little louder.

No response.

He smashes the bed with his pickaxe.

The villager awakens. It stares at him blankly.

That is... not open aggression. Although this may be because he is holding a sword at its face.

"Do you understand me?" he asks.

"Hmm."

"Do you understand me?"

"Hrrrm."

"Look, if you do understand me, hear this - if you shout, I kill you. Every single person I've encountered here tried to kill me. Now, you are clearly intelligent enough not to attack the man with the sword, but I have no way of knowing whether you'll kill me once I turn my back."

"Haarrmm. Hmm. Hoom. Hrrrrrm."