If it is any consolation, nightmare difficulty mode is not actually a nightmare, and several people have deliberately handicapped their characters to keep the game challenging, or make it more so.
Nightmare mode was added in the second patch for DKS, due to changes made when they remastered D2:ED which made the game easier. The 'hard' difficulty in DKS was no longer hard, so by popular demand another difficulty level was added, and some adjustments made to the earlier balancing tweaks.
One of the main causes of the difficulty drop in DKS was changes to the enchantment system (which the random item generator also uses) that made enchantments more effective and available at lower levels, so there could be random weapon drops early in the (unpatched) game with +40 magic damage, etc. Spell damage was also changed so any magic damage bonuses or enchantments on weapons would be applied to spells (and on each missile of a Magic Missile volley), making duel wielding most effective for a mage (the off-hand penalty was not considered for spell damage, so the duel wield skill would not need to be boosted for a mage that avoided melee combat).
There were also changes made to quest experience in the starting section of Broken Valley to make it easier to level (it is possible to get a couple levels higher by the time you get access to the full Broken Valley, compared to the original release of D2:ED).
