In the Generation II games, if an opponent's Pokémon is affected by Nightmare and they cure it with a Full Heal, the effect of Nightmare will remain. This is documented by Chickasaurus in this video
(inspired by this video
which accidentally encountered it). However, that video doesn't delve into the cause.
Nescientist pointed out
that, according to the disassembly
, when either player uses a Full Heal (or Full Restore?), the player's Pokémon is cured of Nightmare, the Toxic effect of poison, and confusion, regardless of who used it.
So, while this could mean that the Toxic counter would continue to increase even if an opponent cures itself of poison with a Full Heal/Full Restore and potentially fail to cure their own Pokémon of confusion, I think it would also be worth looking into what happens to the player's Pokémon. While I don't know how you would get an opponent with a Full Heal/Full Restore to use Nightmare on the player's Pokémon, you can certainly get Koga to badly poison your Pokémon; if your Pokémon is badly poisoned, but Koga uses a Full Heal/Full Restore, in theory your Pokémon should have its poison become regular poison. Likewise, it's possible that opponents using Full Heal/Full Restore can cure your Pokémon of confusion.