I don't have this concept down much - I'm not even sure why itd be useful, so might be a limitation rather than a power (like slow). But I was interested in the idea of a slow fade, like the Cheshire cat, or a turn to smoke style dracula etc. So for some element of the turn, the Nightmare isn't fully there, but it hasn't left either.
It probably makes more sense as a reverse invisible, normally the Nightmare is tangible, when it moves (using the proposed teleport to sleeping creature) it becomes intangible, flip the ready marker to track this - leave the Nightmare where it is for the remainder of this turn. During the upkeep phase move the Nightmare to a zone with a sleeping creature. If there are no sleeping creatures during the upkeep phase the dreamlink is broken and the Nightmare stays in its current zone and takes 1 direct damage.
It might be adding complexity for little advantage or value, but I sort of liked the idea. I also thought it would drive the people arguing about playing cards in the upkeep phase bonkers if a creature could move during the upkeep phase
It would give the opponent plenty to worry about, as if there are multiple creatures asleep, you don't know what to defend until the next upkeep and the move has resolved. On the flip side, its still in range and may be vulnerable, but its intangible now so may be harder to hit. It would make the ready marker teleport less powerful as the Nightmare isn't instantly safe, but still pretty strong against many attacks. I think the health would need buffing a little so the attacker needs to weight up trying to kill it outright with a strong attack, and the Nightmare fleeing in intangible form, or playing a less strong ethereal attack that can't be dodged but less likely to kill outright.
A variant was to play a token at the proposed destination, until the upkeep phase and the movement resolves the creature is in both zones and can target (and be targeted) accordingly.