Here's an idea for how to make Nightmare 2 a lot better
First make the portrait stay same when the cutscene starts, it shouldnt change. And in the Nightmare, add Diane and Mya to the animation too.(Or it could be the Mannequin version of them if you dont want to model them. But i think actual models would be a lot better)
They can disappear or fade away once the cutscene focuses on just Mr. Peterson and Aaron. And the rest can stay the same as it is
I also attached a very crude concept i made for this suggestion (i had to flip the image lol)
I think this would improve this cutscene a lot and it would be really cool to see this portrait we knew since HN1 come to life