Is it unusual for a character in a dream to step out of context and confront the dreamer look them in the eye and call them by name?

What do you mean by stepping out of context?

"Identity" doesn't exist in dreams the way it does in the waking world. It's not unusual for the dreamer to change identity or another character in the dream to change identity or for someone in a dream to be more than one person at the same time.

I mean like Groucho Marx stepping out of character and speaking to the camera

It doesn't seem strange. It just seems like an example of you looking at something in your dream from a different angle, maybe getting a different perspective on yourself or whatever the dream is about.

If you think about it, the characters in a dream are all really "you" anyway - they all come from your mind.

Can you give an example of when it happened in a dream (explain the details of the dream.)

My own experience is that the dreamer is not analagous to the camera, the dreamer is part of the cast who has not been shown the script. Usually in a leading role.

You can't take a waking-world context into a dream. The dream sets its own context and is "real" in the sense that any play, movie, TV show or book is real. If the plot calls for Groucho to talk to you, he will.

A relevant question: Did you find this unusual in the dream, or only after waking? The answer might be highly relevant to the meaning to be drawn from it.

i was startled and that was what woke me up from the dream up until that time groucho and i were a part of the cast and interacting "normally" in a dream but then he, as i say broke character and i woke with a gasp

Since it did not surprise you or seem out of context in the dream, I'd say it was normal for a dream.