Don't get me wrong, I don't think a live-action Paprika is by any means an impossible task, but it definitely isn't an advisable one. It would have to be backed by a massive budget to pull off the story of a detective chasing a murderer through the dreams of his victims, a budget I'm not sure any studio is going to give to a man whose last film was the critical and commercial failure Poseidon. My cynicism is lays not in whether it's possible to bring the limitless, illogical dreamscapes to the real world, just whether or not it's possible for Petersen.
Even with a limitless budget, there's just no matching the kinetic fury and awesome imagination found in Satoshi Kon's adaptation. If you haven't seen the film, watch the trailer below. It'll be obvious why some things are better left in the unbound hands of animation.