That sounds a lot like a night terror. Both my kids get them, although they're a few years older. Almost like a trance with some minor responses to questions.

My kids always need to pee when they have these, so we guide them to the toilet and they can handle the rest most times.

They are immediately asleep again when they lay down.

My uneducated guess is that even though he's looking at you and your wife he's not conscious and still 'asleep' until the part where you notice him actually waking up.

The real answer is, if you're concerned about his health or safety because of this issue, you should ask your pediatrician. If it was me I'd probably just let it ride and see if it's a phase he's growing through. I had night terrors at different points of my life, even in adulthood, and it was infrequent enough I didn't worry about it much as distressing as it could be in the moment. It would always go away for a long while after a couple nights.

Yep, those are night terrors. Settle in, because they could continue for years.

My three-year-old still randomly bolts up and demands to: go outside, play with toys, use the toilet, etc. he will claim it is morning and that he should wake up. He starts putting his bed away even though it’s pitch black outside. All while screaming his lungs out.

He seems to be wide awake, but he isn’t. His brain is doing this to develop the pathways needed to create a sleep cycle. He responds to my presence too, just in a completely irrational way. Like I'm part of the dream. Then just as suddenly as he started, he stop fighting me and just sits there for a moment before falling over and going back to sleep.

They used to go on for up to an hour, now they will graciously stop after 15 minutes. It was pretty frightening at first, but now it’s just a matter of making sure he doesn’t destroy his room or hurt himself by flopping all over the place.

Make sure you have a carbon monoxide detector nearby.

One other possibility to consider: sleep apnea. Around age 2 or so, my daughter would wake up screaming in the middle of the night, and by my memory it seemed like she was crying so hard that she couldn’t catch her breath. Eventually we’d calm her down and she’d immediately go back to sleep. Later that year, we went on vacation and all slept in the same room, and her snoring was so loud. My 3 year old said he couldn’t sleep because she was so loud. And it definitely sounded constricted. So we knew we had to take her in. I’d had my tonsils and adenoids out as a kid so I wasn’t super surprised when the doc said that her tonsils were huge, and she had the surgery shortly after her 3rd birthday, after a sleep study that confirmed apnea. All of those scary wakeups stopped. She was also a less difficult toddler because she was sleeping better and generally happier. So if any of this sounds similar, definitely talk to the doc!