Reala is who NiGHTS would be now if Wizeman succeeded in keeping NiGHTS obedient: if NiGHTS had the good and the rebellious spirit crushed out of him by Wizeman's brainwashing, cruelty and persistence.

Reala is what NiGHTS fears in himself becuase Reala represents what would happen to NiGHTS if Wizeman really got a hold of him.

NiGHTS is what Reala fears in himself becuase NiGHTS is a living reminder of what he could be- the things he's too afraid to pursue for himself.

Either way,  I do believe the importance of Reala's role is a reason why the appearance of a pre-rebellion NiGHTS might potentially be a harm rather than a benefit to the NiGHTS series. Reala seems to be the avenue from which the life NiGHTS would have lived under Wizeman's rule is explored, and it's the avenue from which NiGHTS is forced to confront that part of himself.