Whole section about Nightmare matrix is pure misunderstanding of obvious things and just fantasies about B-movies that comes out of nowhere!
There are many clues that suggests that Merovingian was a program that acted as literal representation of Devil (do , while Architect himself looks like representation of God. There was Angels, Cain and Abel, Limbo ave, Club Hell, whole matrxi is packed with bible quotes and references, and the name of guy refers to middle ages aka dark age period dynasty. Does it ring any bell?
When the program could act like a devil, and be surrounded by demons, angels, vamprires and other supernatural things, and when does people could believe in this kind of cover up story? What was that time of human history that could be described as nightmare? What is the best period that based on human history "to more accurately reflect the varying grotesqueries of your nature"?
Ist not it obvious? Architect was refering to medieval period of human history, where people was superstitious enough to believe in Devil and other supernatural things that was literally represented by programs, which are now excile in modern-age matrix, since they dont belong to a new setting and should adapt to it.
So Merovingian adapted,to it, now he is not literal devil anymore, but a business man, yet he still pocesses that "supernatural" powers and even controls limbo which was also adapted to look like train station (re-skined\re-designed to look modern).
I suppose that existance of limbo that connects "real" world and matrix, suggests that in nightmare version limbo connected "real" world and "after" world aka heaven and hell that was presented literally in addition to medieval earth.
In Matrix v3 "real" and "after" worlds was redesigned to virtual 20 century world, and "real" post ~21-25 century world, but connection between them and limbo, since it acted as isolated matrix evironment that was not affected by re-design, still remained and allowed to transfer things between "program" and "human" worlds.
Idea of people leaving in b-movie styled world does not make any sense and have no standing ground, while idea of middle ages and presence of heaven and hell suggested a lot,there was no human history period like "b-movie", this should to be edited to stop spreading misinformation.