Lani said either translation is correct (and you were there vs. and there it was) because Japanese doesn't put much stock in pronouns. That's why she is interested to see how the movie line was translated for Japan. This translation essentially has no context built into it.
For her to actually translate the line would build in information about how Dorothy viewed the dream as real or unreal, how she viewed Oz as a physical location in relation to Kansas, whether she thought relatives were literally with her in Oz or people similar to her. How she relates herself hierarchically to each individual she is talking to.
But, lacking any decisions on that, she says the babelfish translation I posted above is good enough. But this is a problem with all babelfish Japanese translation. To be completely accurate requires knowing who is talking and to whom they are talking.
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