I don't think the flashback told the first time Luna became NMM.

[Zoraxe 546]

In the Flash back in the episode 'Princess Twilight Sparkle' we see Luna become Nightmare moon and then get defeated by Celestia and sent to the moon. I don't think that was when Luna became Nightmare Moon, even now as depicted in 'Luna Eclipsed' that Luna can morph into her Nightmare form at will. There were legends about Nightmare Moon and a statue of her in that form, so that short confrontation where Luna was banished can't have been the only time she took that form. I think that flashback was just the culmination of the conflict. Plus, her name was Nightmare Moon, so I think she was haunting ponies dreams for some time before she was sent to the moon.

[Fhaolan 4,494]

I had a thought about that, mainly because the conflict between Celestia and NM was portrayed as way, way too short for the cultural impact it was implied to have, is that Luna was taking the form of NM several times prior to the events in the flashback, but Celestia was unaware of NM being Luna until then. Luna had managed to keep it a secret up until then. That last transformation being 'for realsies', and by Luna's expression during it, an unexpected and uncontrolled transformation unlike the previous ones.

[Kyoshi Frost Wolf 42,202]

Ah, her haunting the dreams of other ponies is a really good theory since she has dream powers and all of that. It would make sense that the corruption had control of her before the actual showdown between the sisters.

[Zoraxe 546]

@@Kyoshi,

 

Yeah, I rather like the idea that she made nightmares, it makes sense.

[GuyNamedEarl 1,332]

That's a really interesting theory. Definately makes sense.