You are incorrect PP.
Shadowy Form does NOT redirect attacks targeting the Dreamer.
If there is a Nightmare model within 3" of the Dreamer, he cannot be targeted. Period. End of Line.
In the case of Whirling Death, you'd better make sure to kill off all the other Nightmares (that are legal targets) within 3" of the Dreamer with the attacks or you can't even swing on him.