I've beaten this scenario twice now and both times it was with the same type of decks.

Deck 1: Elrond, Glorfindel, Bifur - Mainly focuses on setting up Elrond as a strong defender with Unexpected Courages/A Burning Brand/Arwen/Cloak of Lorien. Has access to traps and is otherwise a Vilya deck. Although, I think that removing the Vilya aspect of this deck would make it more consistent against Nightmare To Catch an Orc and instead focus more on quickly getting Elrond set up as a defender.

Deck 2: Power questing deck with chump blocking and Sneak Attack/Gandalf access (Dwarves/Gondor etc.).

Even still, these decks aren't exactly consistent against the scenario as sometimes you are forced into exploring locations due to not being able to outquest the staging area. This can cause you to get overwhelmed by enemies before you are ready. Sine the scenario causes enemies to make attacks during the quest phase, even Elrond is sometimes not enough to defend all of them with 3x Unexpected Courage.

So, what are your strategies for the nightmare version of this quest? Some things I've noted help considerably with beating it are:

1) Avoid searching unless absolutely necessary until you have stabilized and are ready to find enemies from searching

2) Thror's Map is a lifesaver. Thror's Key to a lesser extent, but it certainly helps against that location with threat equal to the number of the first player's characters.

3) Traps are great in helping you reduce the amount of attacks you have to take.

4) Bring shadow cancellation