Revealing mistake: After the doorman tells the four they can't go see the wizard he returns back into the palace and you can see his shadow where it shouldn't be against the painted backdrop wall inside the door on the left. (01:07:25)
Revealing mistake: When the guard tells Dorothy that she may not see the Wizard, Dorothy starts crying and tells a sob story about Auntie Em. Then, it shows the guard crying, but the tears aren't coming from his eyes. They're coming from above his eyebrows. (01:08:00)
Visible crew/equipment: As the door keeper tells them he will get them to the Wizard the camera shadow can be seen moving across the green door. (01:08:15)
Revealing mistake: When the foursome are granted permission to see the Wizard, they get up, link arms and proceed up the steps. You can see the wire that holds up the Lion's tail get caught in front of the Scarecrow's arm. He then lets it loose very carefully by unlinking his arm. (01:08:30)
Continuity mistake: As the four go through the green doors to see the Wizard the hallway triples in length between shots. (01:08:40)
Continuity mistake: Before the four go in to see the Wizard, and as they speak to him, Toto jumps from right to left between shots several times. (01:09:35)
Revealing mistake: When they meet the Wizard for the first time, his big projected head doesn't reflect off the shiny floor, like everything else. (01:09:54)
Revealing mistake: You can see strings attached to the witches monkeys as they fly, and also strings from their bodies to their wings, to give the wings that flapping effect. (01:11:20)
Audio problem: When the Lion runs out of the Wizard's chamber we hear noises but his mouth is not moving. (01:12:30)
Continuity mistake: The Lion holds the bug sprayer in the crook of his arm as they walk up to the sign in the Haunted Forest. In the next shot he's holding it in his hand. (01:13:10)
Other mistake: When entering the Haunted Forest, the Scarecrow is carrying a pistol and a stick, the Lion has a bug sprayer and net, the Tin Man has a monkey wrench and his axe. But different scenes after that shows some items missing and then returning. I guess in the "Jitterbug" scene that was cut, they lost all those things but the axe. (01:13:15 - 01:16:00)
Revealing mistake: The wires can be seen behind the Tin Man as he is lifted up in the Haunted Forest. (01:13:55)
Revealing mistake: In the scene where Dorothy, Tin man, Lion and Scarecrow are in the haunted forest and are discussing whether or not to believe in spooks, Tin Man is lifted up into the air and then comes crashing to the ground. You can see his pants wrinkle up as he's trying to get up. Since when does tin wrinkle like that? (01:14:00)
Continuity mistake: When the Tin Man is levitated and falls to the ground the metal covering his left leg is crumpled up. When we see him again from behind as the flying monkeys attack, the metal covering his leg has never been bent. The metal on his lower back has also been repaired since the fall. (01:14:05 - 01:15:05)
Revealing mistake: In the Haunted Forest, when the Tin Man is lifted up then lands back on the ground, at Tin Man's lower back you can see his white T-shirt tucked into his pants. (01:14:10)
Visible crew/equipment: The Wicked Witch looks at them in the Haunted Forest through her crystal ball and the wires holding Nikko's wings can be seen as they flop around. (01:14:20)
Other mistake: When the Wicked Witch is giving the orders to the Nikko, the Head Winged Monkey, it shows his troops flying away before he's even finished receiving his orders. (01:14:40)
Continuity mistake: As Dorothy and the rest are chased by the flying monkeys the order of the four changes between shots each time we see them in the overhead shots. (01:15:10)
Visible crew/equipment: Studio lights are reflected in the Wicked Witch's large crystal ball, as Dorothy sits down and cries beside it, just before she sees her Auntie in it. (01:15:10)
Continuity mistake: When the Tin Man is attacked by six flying monkeys they take away his axe. Several seconds later he has it again. (01:15:20)
Answer: In the film it's left ambiguous. At the end it's strongly implied that she was dreaming. The characters she meets all look like people she actually knows. In the original book, she actually went to Oz.