I'm unsure of what the question is. I think it's pretty interesting that you have a cousin who is also into ABDL, that's cool and all, but are you wondering if he is expressing to you a fantasy that he wants you to engage in or are you just wondering if he was merely confiding this weird dream to you?
I mean, regardless of the lack of a biological relation, I think it would still be weird to be your cousins Daddy. I have some older cousins who are not related by blood and I don't think I could do anything with them other than talk and hang out at the usual family get together. A Daddy/Baby relationship with another member of your family seems just, well, wrong to put it bluntly, forgive me if anyone thinks to the contrary. So, if you feel as though this dream means that he's looking for you to be his Daddy figure, I would definitely have a good talk with him about how it wouldn't be right. I mean, it's great that you guys have a similar interest, it's good to have someone in your family who not only knows about this side of you, but is in the same boat, but being understanding and talking to one another about your shared interest is a lot different than making good on his fantasies and engaging in a Daddy/Baby scenario with him.
If he's just confiding with you, then that seems pretty harmless. Maybe you could have a talk with him and let him know that it's wrong for him to be looking towards you to fulfill that Daddy role/fantasy and that he should really be looking for someone else to make his fantasy a reality. Let him know that you can be a sympathetic ear and someone to talk to when it comes to ABDL, but that you will not engage with him in this lifestyle. From the sounds of things, he could also be just as taken aback by this dream as you were by hearing about it, if that's the case there is probably no ulterior motive here and he just wanted to tell you about the weird ABDL related dream he had because he knows you are an ABDL too.
I don't know, like many have said, there is something really tricky if not really taboo about something like this, I would never get involved with extended family, biologically unrelated or otherwise because well, to me that's just wrong, they're family not a romantic partner or a playmate and as NovaDL said, proceeding further could potentially cause a rift between you and your family and a lot of unnecessary drama.
I'll reiterate, if he's merely confiding in you, that's fine, be someone who can listen and be a good friend, but let him know that you can't be much more than that. If he is telling you this with the motivation of making you his Daddy, then I would put my foot down and tell him no. If he just wanted to tell you about his weird dream, then shrug it off as a weird dream he had and move on.
Like I said though, not really clear what the question is, is him telling you this his way of hinting that he wants you to be his Daddy or is he simply telling you about this dream that he had?