Techincaly, Marin is Link dreamng about Malon from OoT. (Not confirmed) Also, if you finish the gamewithout dieing (very hard!) you get an alternate ending were you see Marin is reincarnated as a seagull. But yea, it is messed up.
Actually, you're quite a ways off there. Malon is based off of Marin's design. Also, the Link in LA is not the same Link as in OoT. There is no way Link could've been dreaming about Malon, as she wasn't even created at that point. LA came out 5 years before OoT.
Anyway, it's supposed to tug at your heartstrings like that. It's not quite selfish to try to find a way out of a "dream", especially one that was much more than a dream; a separate reality. Yes, he has to destroy it all, but actually staying there would have been selfish. You have to remember that he was a hero- he'd protected Hyrule before, and he was originally on a journey to find more ways to protect the land. His destiny lies with Hyrule, not Koholint, and making the right choice is
supposed to be hard. It's supposed to hurt a little.
But, if you get the good ending, you'll see that it's very possible that Marin's wish was granted... this was repeated in Phantom Hourglass with Linebeck.