I do believe there was such a place and it has been subject to a massive natural occurrence. As for the dreams and the past life idea, I believe that is highly possible, but at the same time I can't help but think it is also possible that an Atlantian spirit might be reaching out to your (sub)unconscious mind to bring it to attention and have the truth discovered. It could be possible they are bestowing you their same emotions and fears combined with the memories to put you in more of the mentality of the dying Atlantian Priestess, and the psychic picked up on these (I apologise if I went off on a tangent).
I never thought of that. Good answer! Definitely Something to think about.