"Should you visualize in 1st person or 3rd person?"
Who will visualize in third person? It is so unheard of. I never did that! Everyone of us dreams through our own eyes.
But there is another side to this concept. I realized it only when I read an article on the subject matter by my favorite writer Stephen Martile. He says that there are a couple of benefits in visualizing as an observer.
I quote him:
"Being the observer allows you to distance yourself from negative feelings. In some situations this can provide more clarity and calmness of mind. And with calmness of mind comes better thinking power."