The Collaborative International Dictionary of English v.0.48:

Daydream \Day"dream`\ (-dr[=e]m`), n.
   A vain fancy speculation; a reverie; a castle in the air;
   unfounded hope.
   [1913 Webster]

         Mrs. Lambert's little daydream was over. --Thackeray.
   [1913 Webster]

WordNet (r) 3.0 (2006):

daydream
    n 1: absentminded dreaming while awake [syn: reverie,
         revery, daydream, daydreaming, oneirism, air
         castle, castle in the air, castle in Spain]
    v 1: have a daydream; indulge in a fantasy [syn: dream,
         daydream, woolgather, stargaze]
    2: have dreamlike musings or fantasies while awake; "She looked
       out the window, daydreaming" [syn: daydream, moon]

Moby Thesaurus II by Grady Ward, 1.0:

79 Moby Thesaurus words for "daydream":
   Walter Mitty, absence of mind, absentmindedness, absorption,
   abstractedness, abstraction, airy nothing, autism, bad dream,
   be absent, bemusement, brown study, bubble, castle-building,
   chimera, conceiving, daydreamer, daydreaming, deception,
   deluded belief, delusion, depth of thought, dereism, divagate,
   dream, dream of, dream vision, dreaming, dreamland, dreamworld,
   engrossment, false belief, fantasy, fantasying, fit of abstraction,
   freak out, go woolgathering, ignis fatuus, illusion, imagination,
   imagining, incubus, misbelief, misconception, moon, mooning,
   moonraking, muse, musefulness, musing, muted ecstasy, nightmare,
   nostalgia, phantasm, pipe dream, pipe-dream, pipe-dreaming,
   preoccupation, reverie, self-deceit, self-deception, self-delusion,
   stargaze, stargazing, stray, study, trance, trick, trip, vapor,
   vision, wander, wishful thinking, wishfulness, wistful eye,
   wistfulness, woolgathering, wrong impression, yearnfulness