Maybe this is a personal reach as I'm not a smoker, but I interpreted the phrase "cigarette daydreams" as recurring daydreams that take you away from your troubles and they can be addicting like cigarettes. I also think that it's about a situation that's fairly decent between two people that have had a thing for one another for a while. However, both of them are always yearning for something more.
Maybe this is a personal reach as I'm not a smoker, but I interpreted the phrase "cigarette daydreams" as recurring daydreams that take you away from your troubles and they can be addicting like cigarettes. I also think that it's about a situation that's fairly decent between two people that have had a thing for one another for a while. However, both of them are always yearning for something more.