I've been replaying the game on nightmare difficulty and yes, some parts have been a real nightmare. I'm up to chapter 8, my least favourite chapter.
Chapters 5 & 6
Differences from survivor difficulty.
In the first play through the fear came from not knowing what was coming, but knowing what's coming next with how little ammo you have is worse! I thought survivor was cutting it close but this is crazy, every shot counts.
I'm still not sure about the gun balancing. I think it would've been better to have the handgun slightly more powerful and accurate by default, and maybe counter that by not being able to upgrade so much. I've never been a fan of new-game+ modes but nightmare difficulty might actually be fun to play with upgraded weapons.