I think I'm getting old because I never get things on the first take anymore. My question is whether the statue lady was always bad and the dreamcatcher just made it worse (kind of like a really mean wolf who later contracted rabies) or if the dreamcatcher somehow caused the entrance of a separate nightmare or entity that was crueler and more powerful, that drove the original nightmare away. Could someone please clarify if I have this right:

1. The dream catcher caused a separate, evil nightmare to slowly overtake what used to be a regular nightmare until the evil was all that was left and --
2. --regular nightmare (statue lady) peaced out, breaking the dreamcatcher and letting the evil nightmare complete the transition to the rotten form that is haunting OP