In The Sandman, many times more than one comic story was covered in one episode but they kept the story serialized in continuity or complimented each other. But in S0E011 they covered two stories "Dream of a Thousand Cats" and "Calliope". But how do these two stories compliment each other? Or it's just two random stories just stitched together?
The stories "Calliope" and "Dream of a Thousand Cats" are collected together in the third trade paperback titled "Dream Country". They are issues 17 & 18 in the overarching comic series, so stitching them together makes sense in that they occur in the comics immediately beside one another (as opposed to them being randomly stitched together).
The stories in Dream Country are all standalone independent stories so they could appear earlier or later, but in terms of their overall position in The Sandman series it makes sense that they occur in episode 11 as they follow immediately after The Doll's House collection of the original comics.
My expectation is that we will see issue 19's story ("A Midsummer Night's Dream") as the first episode of season 2 and possibly skip issue 20's story before moving straight on to a story arc based upon the next book (Season's of Mists) which is eluded to by Lucifer at the end of episode 10.
The story of "Calliope" needed to be featured at some point in order to introduce a major plot point for much later seasons.