In the episode where they're having nightmares, Charles is doing a magic act. When we first see a shot of Klinger in the crowd, he's wearing long "diamond" earrings. In the shots after that, they're no where too be seen.
What you are seeing is the old reruns where they snip little seconds here and there.In the original Charles passes around a hat and Max Klinger puts in his earings and the nurses put in money Etc...
I agree, this is all happening in a dream, as Charles wouldn't try to save a person's life with a magic trick. and if you also notice during this episode, everyone's dreams, change from each camera angle, so this is not a slip up