I agree that the nightmare should be more difficult. It should be an epic event and require a large group of players to take it on. It should be terrifying to take on and unthinkable to attempt it with a small group. This would mean people waiting around for teams for a while (especially if unclanned) so perhaps the doors to the nightmare, or even regeants itself, should only open at set times. People could then try to work their other things around it.
Because of this, the xp/reward for killing it should be equally impressive. That thing probably eats a lot of runners so who knows what could pop out? As well as having it drop it's own unique item (on rare occasions) it should randomly drop items that can currently be found only in specific locations (bat queen bones, viper king armour, even some FSM only items). Going up against the nightmare should have players excited at the idea. Excited about the event, the teamwork, the xp and the loot, but it shouldn't be a farmable source like firemobs etc. Making it blisteringly difficult as well as the auto-lock doors would keep it in check.
I suspect I may get death threats for this suggestion, especially the timed doors, so feel free to ignore.