Currently running a campaign that is a little on the dark side.

One of the protagonists later on could be a beefed-up Granny Nightshade (Night Hag, Dusk Hag, Dunbarrow Witch + Stuff). Beefed up because Granny Nightshade in GoS commands Vampires, Oni, Green Hags and as per GoS, she "commands magic as well as a mighty wizard does and has struck bargains with several dukes of the Nine Hells".

As her fortress stands at a nexus point to the Shadowfell "from which emerge horrors to threaten the land", I am thinking of in the future making the party's day less than great by throwing a mounted Death Knight at them as one of her lieutenants.

In battle, how would you DM a Death Knight mounted on a Nightmare?

It depends, the nightmare can be a fiery horse of destruction or a ghost horse appearing and disappearing with it's ethereal step. 

As a ghost horse you may have some mist appear before you see a cloaked figure standing with a horse. They don't move as you approach and with a single strike of their sword blast your party from the road or maybe they just disappear as your approach. 

or as a fiery horse you could have a fiery knight leading a raid of a city burning every building to the ground with a squadron of flameskull and ash zombies  which are just zombies that look burned  and maybe have a effect like burning when they grapple you. 

yeah nice one

how much autonomy for the Nightmare? a controlled mount, independent or some mixed up Find Steed?

I would make the mount independent unless being ridden by it's owner. Anybody else who attempts to mount the nightmare could take some amount of psychic damage 

The main thing that makes a nightmare a threat multiplier for a death knight is its ability to go ethereal at will, so unless the PCs have an ability to detect or block ethereal threats, the first warning may be when the nightmare phases in from the ethereal and the death knight attacks.

So using the Nightmares ability to go ethereal I’m taking it that you suggest it would be an independent mount? That is if the RAW mounted combat was applied.

how independent? rolling separate initiative and acting independently of the Rider?

or would you modify the mounted combat rule

My understanding, and I could be wrong, is that the Nightmare would act on the rider's initiative count - but has its own AC and hit points. So you would be tracking both the rider and the Nightmare's statblocks.

Quote from Pantagruel666 >>

The main thing that makes a nightmare a threat multiplier for a death knight is its ability to go ethereal at will, so unless the PCs have an ability to detect or block ethereal threats, the first warning may be when the nightmare phases in from the ethereal and the death knight attacks.

 It depends. Unless the party is getting it's flight from the fly or something else with a fly speed of 45ft or greater then the nightmares fly speed alone is enough to allow the death knight to fly 45ft in, attack and then have their horse disengage and fly 45ft away which disables melee. If you want to dial this up then the effects of Ashardalon’s Stride add speed, lets the mount take another action and gain the effect of disengage as well as leaving a flaming trail which will be like fighting the flash.  If you dash with that combo you will also out speed thefly  and possibly even make ranged attacks difficult.

Etherealness is a good opener for a surprise attack but because it takes an action to either enter or exit the ethereal plane they can't do both on the same turn. You would want to ride in , do your attack and then disappear. Then ride away and rinse and repeat which great if there are other enemies to make up the off turns or reappear and cope a round of attacks in which the mount will probably die if not buffed. 

Quote from Stavros_Araatan >>

So using the Nightmares ability to go ethereal I’m taking it that you suggest it would be an independent mount? That is if the RAW mounted combat was applied.

how independent? rolling separate initiative and acting independently of the Rider?

or would you modify the mounted combat rule

 The nightmares health is low enough that it will likely die on the first turn that it is vulnerable. If you want you can buff it with the mounted combatant feat  or combine the health of the death knight and nightmare so they die together.  This will be particularly important if you want an aerial battle because killing the mount in the air will make the death knight take falling damage, they also don't have good ranged options to deal with a flying party. 

It's generally better to run the mount on the same initiative as the rider unless the mount is also a serious combatant on its own and is going to make it's own attacks like a  dragon would.  Otherwise you have the weirdness of trying to synchronize movement with the riders actions at different initiative values.  

Also FYI the death knights health is kind of low for it's CR. With that amount of health it only really works with minions or in support of something like a lich. Its not a solo encounter for level 17 on its own with out a buff. 

Still they can be interesting combatants. You can do things like use Ashardalon's stride and the nightmare to zoom in and out doing a [/spell]destructive wave[/spell] like a sonic boom blast each time they go past  or circle the party to leave a ring of fire while doing strikes or supporting their allies. You can do debuffs  with spells like hold person and command to disable the party while their minions attack. You can also use searing smite to ignite an enemy and then flee to leave them to burn for a bit., if I was going to make this their main strategy id probably change the necrotic weapon damage to fire and have it be a base effect of their weapon. With the nightmare you can also attack an then disappear like a ghost knight. All of these attack patterns are interesting and allow unique personalities with minor changes to the same stat block.

I would just run them as one monster. Up the hitpoints of the death knight a bit, give it fire resistance, match the size and movement modes to the nightmare, and give it Hooves and Ethereal Stride as bonus actions. I think this would make it both more formidable and easier to run.