Just to make sure I've got the picture painted properly in my ol' dome: the plush owner and characters can try to fight the nightmare figure back, but won't be able to land any punches/attacks due to them not being tangible anymore, correct? The only thing tangible on them will be an item within/around that nightmare figure that the plush owner has to steal away and devour in whatever method?

Or will attacks seem to land, but the figure just reverts without issue?

I figure it's the first one, but better safe than sorry to assume!