I have a friend that took abusive levels of melatonin in a futile effort to conquer insomnia. He said laying in bed on 9mg of melatonin without falling asleep was like dreaming while you're awake.
Instead of the 3rd eye analogy, I would describe melatonin as altering your thought patterns to be more conducive to sleep. The types of nonsense thoughts you have right before you fall asleep come sooner on melatonin.
Full essay: http://www.gwern.net/Melatonin