I can confirm that Nightmare was Strange's first major foe (in fact, his *first* foe, at least if the order of appearances is considered - Baron Mordo was his first foe chronologically speaking, but he appeared in a later story). And yes, this character's appearance should probably involve some scary imaginery... Still, there's scary and there Scott Derrickson :) In opinion, Derrickson's movies are beyond scary - they are horrifying, as well as deeply, deeply unsettling... Not bashing him, he's a good director - I just don't know if he isn't too much for a Strange story.
BTW. When it comes to Strange foes, I'm quite sure that the movie will go with Dormammu. A bit sadly, because he's overused, IMHO.