Does seeing the dead in dreams in good conditions indicate that they are enjoying the pleasure of Paradise? Does seeing the dead in a bad condition indicate that they are suffering the tortures of Hell?

All perfect praise be to Allaah, the Lord of the worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His Slave and Messenger.

Visions cannot be taken as proof for judging someone’s destiny, nor for indicating any ruling.

Visions are of three types according a narration on the authority of Abu Hurayrah who narrated that the Prophet, sallallaahu ‘alayhi wa sallam, said: “One comes from Allaah The Almighty bearing glad tidings; one comes from what a person thinks about when he is awake and sees when he is asleep; and one comes from Satan to frighten the dreamer. If a person sees a vision that is pleasant, he may tell it to others, and if he sees a dream that is not, he should not tell others about it. Instead the person should get up and offer prayer.” [At-Tirmithi and Ibn Maajah; Al-Albaani:  Saheeh (Authentic)]

In another Hadeeth, on the authority of ‘Awf ibn Maalik the Prophet, sallallaahu ‘alayhi wa sallam, explained that visions are of three types: exaggerations and excessive doubts from Satan to make human beings sad; things that preoccupy a person while they are awake and a part of the 46 parts of prophethood. [Ibn Maajah; Al-Albaani: Saheeh (Authentic)]

Therefore, seeing the dead in a good condition in a vision does not necessarily mean they are in Paradise, but it may be regarded as glad tidings. Indeed we hope that they are in Paradise.

By the same token, seeing the dead in a bad condition does not mean that they are in Hell. It may be a dream from Satan.  However, you should supplicate to Allaah to forgive them, especially those known to have committed major sins during their lifetime.

And Allaah Knows best.