Knights in the Nightmare should come with a big sticker on the box reading, "This is for the Hardcore Player." It's just that complex a game when it comes to the number of systems at play. There's so much going on here I could probably generate nearly a week's worth of articles and still not hit everything.
The gameplay described in the "Gameplay" section above is only a sliver of everything going on in Knights in the Nightmare. In addition to the time-based battle mechanics, there's a Chaos/ Order system dictating when certain items can be used. Then there's the weapons system. Before each battle, you'll need to select which weapons to bring into battle based on what soldiers are on the field. After getting a hang of the movement, this should be the very first thing you tackle. It will open a lot of doors and really helps push your understanding of how things work.
Another change from the DS version is the reworked control scheme. Rather than guiding the wisp around with the stylus, movement is mapped to the PSP's control nub. I rarely have something nice to say about the nub, but have to give credit where credit is due. I had an easier time zooming around the screen with the nub than the stylus. It feels a little smoother and immediate, which is exactly what you want when projectiles dominate most of the screen.
You'll know fairly early on if Knights in the Nightmare is your type of game. If the notion of discovering some new system every time you play sounds appealing, this is for you. This is probably one of the deepest gameplay experiences I've ever experienced. Though I liked the daunting feeling, I can't help but wonder if gameplay is more complex than it really needs to be. That, however, is a discussion for another time and with people much smarter than me.
As much as I'd like to proclaim this a "hidden, overlooked gem," it's not something for everyone. Knights in the Nightmare is aimed directly at SRPG players who don't mind quirky mechanics or having their patience tested. I enjoyed my time with the game, but I'm also in the aforementioned category. If you count as a member of this same group, you're in for a truly original and deep game.