I do think in the original plot he was intended to be Nightmare. The "waking up in a cell with the world changed around him" thing in the plot is probably set after the new nightmare is defeated. Most probably nightmare possessed Raph soon after Soul Calibur IV, hence why Raphael doesn't know anything.
I always thought that Amy was a vampire who couldn't age thanks to Raphs corruption from the blade in SCII, the fact that she did age suggests that maybe she lost that ability when Raph turned into Nightmare, and that may have also erased any memory of her life before that.
I don't really care much that there wasn't a story mode in the game, story mode will always be half hearted and lacking in a fighting game (I don't see the big deal about MK's story mode, it was a bunch of fights strung together with a paper thin plot too similar to the original movie), but I do think the plot for SCV had a lot of potential, and it should be released separately in an rpg or anime or something.