To the OP - have you tried asking a nightmare character who it is, or if it has a message for you? Or showering it with love and compassion, maybe hugging it rather than fighting or fleeing?

This is supposed to work near miracles. Many people report great success with this technique... apparently it usually reduces the character's size power and aggression and can turn them into a helper.

Just as this approach (compassion rather than antagonism or fear) can work to defuse a real-life confrontation.