In order to take part, you’ll have to have first completed the Priest in Peril quest. The Nightmare is actually a group boss found under the Sisterhood Sanctuary in Slepe. To get there, grab the boat to Slepe from Port Phasmatys. You’ll have to a pay a fee of 10,000 coins for passage. Alternatively, if you finished A Taste of Hope, you can utilize Drakan’s medallion which will transport you instantly to Ver Sinhaza.
You’ll have to enter and fight your way through. Beware, because if you die in the dream, you’ll die in real life (in the game). If you’re playing on Hardcore Iron, you’ll lose your status. Rewards include Inquisitor’s Mace, Nightmare Staff and Orbs, and Inquisitor’s Armor.