Possibility of using the effects of sleep to induce a virtual environment?
As a matter of fact, this can be possible in the future. There have been "predictions" that within this century we will be able to upload our consciousness into computers, creating an environment where it will actually be like reality.

Now, off of theoretical, as of now it's impossible to do virtual reality. All I can provide you with is a theoretical answer, which is above.

As for hormones and safety:


Use sleep hormones, melatonin, serotonin


As for safety, it hasn't been done, I can't answer.

http://www.youtube.com/watch?v=tT1vxEpE1aI

That video is an interesting video by Michio Kaku on this topic.