Even though having dreams within dreams isn't necessarily common, it is very possible and perfectly normal. I've had several dreams where I've been nonlucid on the "outer" dream, but lucid on the "inner". They weren't particularly horrible like yours, but then again I don't have nightmares very often. Overall though, I wouldn't be too worried about it.
On a side note, it's probably safe to move this out of Talk To Staff (posts there are only visible by staff members) so it will actually get some publicity.
*Moved to General Dream Discussion*
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