I can't say I blame either guy for their behavior. Will has mostly negative memories of the Underworld, so he is blind (at first) to its beautiful sides. But Nico thinks of the Underworld as his second home, and he gets annoyed because Will doesn’t seem willing to give it a second chance. It's a test of their commitment to each other: if Will can't look past his bias, can their relationship survive?
I don't know if you're reading a hard copy or an ebook, but the copy I read had a particular pattern printed on the pages where the "dream sequences" occurred. I would see the pattern on the paper and say, "Oh, okay, Nico is dreaming now."
I think the first person POV works best if there's only one protagonist. With two protagonists, as in The Sun and the Star, readers might be confused which person's story they were reading, unless they checked the chapter headings. So, the story was written in third person POV for the sake of clarity.