Nightmare difficulty is unlocked after beating the game on any difficulty. After you beat the game simply switch difficulties and begin again (dont forget the prologue). All your upgrades carry over, and if you are finding the chests and crucifixes on your first run, you should have enough to max all weapon stats. You should have enough points for all skill attributes by ch 2, mission 2 (or 3).
Some general info/tips for Nightmare:
1) Use environmental kills when possible. Luring the enemy and killing with the interactive fire lamps found throughout the levels will put you in a cutscene. You will be invunerable during the scene and will instantly kill any enemy. The lamps can be a bit particular about your character being in just the right spot, so be prepared to deflect.
2) there are some areas where you can run past enemies, but not too many. entering the curse will cause you to move faster and break your combat stance quicker. Running is an effective method during ch 3 (mission 3 i think) when Denz and Esteban become separated, and ch 5 mission 1.
3) try to use a mace and sword or ax combo. Maces are more effective against armor.
4) once you get the LT + B flame attack, use it often, as it will stun enemies. this is especially helpful for boss attacks because boss minions will often endlessly respawn. the stun will allow you to focus on the boss and end the level quickly (even ch 4 mission 3 which seems difficult for many)
5) fighting death and certain bosses (4/3) require you to do a flame combo between characters, so take note of those on your first playthrough
6) when fighting the big demon on Ch 4 / msn 5, use the base flame (LT + A) 2x to attack on his head when he falls, it will take about 5 hits in 3 min using fire. If your try to just use weapons, all your weapons will break on nightmare and you will never kill him.
7) isolate enemies when you can, or run away first and let them chase your partner.
8) use heal (LT + Y) in between fights if you are wounded. You must stand next to the other character and sometimes you must enter cursed mode first before you can heal. You cannot heal unless you are down at least one health bar.
9) Some people experience a glitch on this ach. I personally did not, but if you do, the general concensus is that replaying the last level with credits seems to do the trick.
10) staying in the curse too long will cause you to die. In order to maximize your time in the curse, upgrade it early (obviously). A helpful trick also is to exit curse mode when you go into a weapon finishing move. you will be invunerable during these moves and this will allow your curse meter to recharge. once the move is complete, reenter curse mode. I found i was able to effectively fight in cursed mode for almost the entire game using this method. Once you have upgraded your weapons, you will execute the finishing moves fairly often, even if you are a button masher like me.
Well, I think these are the highlights, if anyone has suggestions please feel free to comment.