1. horror check
2a. if success - take damage from nightmarish ability
2b if failure - take horror damage and... ? do u take extra damage from nightmarish ability as well?
4a if success - nothing else happens
4b if a failure - combat damage and damage from the overwhelming ability
Almost. Everything is right except the end of the (b)s: you only take the appropriate monster damage, and ignore the Nightmarish/Overwhelming.
Consider the thematic idea, if that makes it a little easier to visualize. Horror Check: your strength of Will was enough to stare down that thing that couldn't possibly exist in reality (passed check, no horror damage), but OH GOOD LORD, it's just so damn NASTY! (Nightmarish sting to Sanity). Combat Check: You took your sword to task against the giant thrashing wall of flesh called the Shoggoth (passed check, no combat damage), but DAMN, did it take forever to put that pusbag down! And it sure got a few licks in too! (Overwhelming sting to Stamina).
Also, just in case I'm not following your mind exactly...when you first encounter a monster, you have a chance to evade it ENTIRELY before you even have to make a Horror Check. If an Initial Evade Check is passed, you don't have to do anything else with the monster: no Horror Check, no Monster Abilities, you can even keep moving. But if you pass an Evade Check after the Horror Check, the Encounter is over, but you're still stuck there. It's the difference between leaving the area and merely hiding in the danger zone.
More theme: You know there's something out there, you just hope it doesn't know where YOU are. If you can just get across the room without being spotted.......made it! Time to get the heck out of this blasted house/neighborhood! (passed check, moved out of Location/Street) .........crap! It saw you and a claw raked across your back! (failed check, take combat damage) Now, assuming you passed the Horror Check.......Good thing the lumbering hulk is so slow. If you can keep quiet, maybe it won't realize you're only hiding behind the couch a few feet away (passed check). It might move off searching for you and give you another chance to make it outside and away from here (no movement until next turn).
1 + 2 as above
3. combat check
4a if success - take damage from overwhelming ability
4b if failed - combat damage and damage from the overwhelming ability?
Same as above on the (b)s: only monster combat damage, no Overwhelming.