To unlock the Nightmare difficulty setting, complete the Rally Cup on Hard difficulty.
Nore: Cups will only be unlocked for the difficulty at which you play the required cups to unlock it. (i.e. beating the Watermelon Cup on Normal will only get you the Classic Cup for Normal):
Win the circuit races and rally under the easy difficulty setting.
Win the circuit races and rally under the normal difficulty setting.
Win the circuit races and rally under the hard difficulty setting.
Eat five blue ghosts in Pac-Mobile mode to unlock the Black Bomb upgrade for the Green Bomb.
Eat 12 Blue Ghosts in Classic Cup
Eat 10 Blue Ghosts in Watermelon Cup
Eat 8 Blue Ghosts in Grape Cup