I would be in favor of using Nidhogg as a way to add a series of new NMs to the game. Something along the lines of XI's sea pop system of Abyssea's tier spawning.
Basically have in each of the three base continents (Thanalan, La Noscea, and Black Shroud) use a series of NMs to upgrade... say... a Blood Stone, to such blackness that it will eventually summon Nidhogg.
Stage I: Any of the open world NMs we already have will award you a base key item (Pink Stone) 100%
Stage II: This stone will allow you to pop one of three stage II monsters in each of the three starter zones. (Could be based off species of mob, or some other method). This NM will be challenging for a light party of 50s (lv55~59 or so) and could require several kills to upgrade to (Crimson Stone) stone. Could also drop medicore Lv40~49 gear.
Stage III: After obtaining a Crimson Stone, head to Coerthas to spawn a challenging drake NM that would require a competent Full Party of 8 to defeat. Ideally this NM would drop decent lv50 gear and also have a chance to break your stone. Could break your stone by using certain moves at certain %s if certain body parts aren't incap'd (e.g. At 75% He would ready Spike Flail unless his tail had been broken) If successful, NM would upgrade your stone to a Blackened Stone.
Stage IV: Nidhogg. Taking your Blackened Stone to a ??? in Coerthas would spawn Nidhogg, a very challenging NM that drops exceptional Lv50 gear. Failure to kill him would destroy your Blackened Stone.
Thanalan Example:
Pink Stone -------------- Crimson Stone ----------- Blackened Stone ---- BOSS
Pyrausta -------------
Nest Commander ------- Lv55 Pieste NM ------------
or Cactar Jack --------
==================================--------------- HNM Drake ------ Nidhogg
Daddy Longlegs -------
Bardi ------------------- Lv55 Ahriman NM ----------
Kokoroon -------------