I really feel for you, Welsh Dragon. I used to have these awful dreams where people were after me and I'd wake up sweating and think, "Whew ! What a nightmare !" Not to be able to wake up is dire.
Can't give you any details on medical treatment really, but I can give you some background info on paranoia that might hopefully help you get a handle on the problem.
Paranoia is second only to depression and anxiety in frequency as an emotional dysfunction, and is often suffered as a result of prolonged intense physical or emotional stress. Soldiers on exercise, mountain climbers, solo sailors, people who have had pneumonia or surgery, anyone who is suffering from sleep deprivation or starvation...all are prime candidates for it. Not to mention students studying for final exams, workers with harsh bosses, immigrants experiencing culture shock, and people coping with bereavement, family feuds, divorce, etc.
So you're not alone with this problem ! 
But you can imagine, a lot of people are not going to talk about it. 
Personally I get it when depressed, and sometimes as a side-effect of medication, and find it horrible.
Paranoid ideation as a symptom can be thought of as an exaggerrated version of a mental response that we all have built into us for those (hopefully) rare times that we need to cope with a particularly hostile world. I don't want to make light of your problem, but as the old joke says, if you're feeling paranoid, it doesn't mean the world isn't out to get you; what it quite possibly means is that the world doesn't seem to give a darn about you and with no break in sight, your brain has finally switched onto "This much bad luck isn't natural, I need to feel really worried here" mode.
I think paranoia may occur more often in men, and in people who have fewer stable emotional relationships, but I wouldn't like to swear to it; it's quite a while since I read up on it.
I do know that there is a theory that like many emotional disorders it may be caused by a variety of pathogens (bacteria, viruses, parasites) and may be treated with drugs such as Amantadine (UK name), as well as anti-depressants. In the US it was treated once upon a time by injections of B Complex vitamins into the muscle, as it was known that these vitamins were severely depleted by any form of stress and were considered closely related to whatever mechanism is involved in the brain.
Sorry, I cannot give you any more detailed facts or figures about therapies, the only other suggestion I can give you is to try Cognitive Behavioural Therapy (CBT) which may teach you techniques that help you understand how your mind is working, where you might be jumping to conclusions, etc.
Hope this helps, best of luck !