I don't think nightmare dragons would be part dragon.

Okay before I explain what I think, how exsclty does ashiok nightmareify a creature?

I think Sarkhan takes the cake on physical prowess so he would win in this scenario, and Rupture Spire doesn't appear to be near any water so he has an advantage over Kiora. But I don't think Ashiok would ever try to fight them both head on. He/She/It would go for the sneaky approach and take them down when the least expect it. Like when Sarkhan is gloating over his victory, Ashiok would just pop up behind him and poke him with his evil doom finger and drive him (more)insane

It is a conjuration from the target's inner psyche. It's pulled from within that being, meaning that whatever it is in their mind, it is as well as being a nightmare. Otherwise, it would lose all creature types except the nightmare type it gained.

Okay, I'm going to tackle this one in traditional OrcishLibrarian style. In other words, I'm going to start with a baseless pop-culture analog, then proceed onward from there in a rambling stream of consciousness until I either arrive at a conclusion of run out of steam.

To paraphrase my favorite philosopher, Red Green: It's not smart, and it doesn't make sense. It's just the way I do this.

Okay, here's our obvious jumping-off point. Ashiok uses your own dreams to hurt you. So, for all intents and purposes, Ashiok is Magic's Freddy Krueger.

Now, that gives us a clear angle of attack on this problem. As long as Kiora and Sarkhan can just stay awake, Ashiok/Freddy can't hurt them. Which raises the logical follow-up question: Which of Sarkhan or Kiora is less likely to fall asleep?

Kiora, being of the crashing wave and all that, is probably at the greatest risk of being lulled into slumber by soothing ocean sounds. Therefore, one can logically conclude that she's going to eventually take a little nap, and is probably going to be gruesomely and ironically dispatched by some sort of nightmare kraken monster. Which leaves us with one down, and two to go.

Sarkhan is all about his dragon form. And dragons, being among the most metal of all mythical beasties are probably too busy rocking out to get much shuteye. (Except when they sleep on top of giant piles of treasure. Since, to the best of my knowledge, Sarkhan doesn't have such a treasure stash, I'm going to assume that he dodges this bullet.)

Anyway, I assume that Sarkhan dragons-up, put on his Beats, cranks the volume on "Operation Ground and Pound" up to 11, and headbangs the whole time while giving Ashiok an almighty whuppin'.

The final verdict: Ashiok defeats Kiora, Sarkhan defeats Ashiok, Ronnie James Dio rises from the dead and records a concept album about the whole thing.