I just did the scarecrow visualize thing where you're put at a certain power level instead of what you earned with Eureka points, and I noticed I got significantly buffed. Fighting Nightmare Doll ASAP isn't recommended, as you're underlevelled by that point.
To get to fight this boss, you need to start off by investigating a scarecrow making noises to find Margo in the first place. Later, you need to be on the food street in the commercial district where you talk to a woman about broccoli pies disappearing. After that, you need to go around behind a wheat field to find Margo again.
This should lead you on to the part where you have to fight Nightmare Doll, and the name is fitting if you unlock the fight ASAP.