。
I was half-awake, watching TV.
Literal
Dream-reality [with-で] TV [object-を] was-watching.
夢うつつ ('between dream and reality, half-awake/half-asleep') is a poetic compound — 夢 (dream) + うつつ (reality, being awake). で marks the state. A vivid image of dozing in front of the TV.