1: In response to the first question, Yes! I would certainly panicked for the first few days and for sure I would got an insomnia. But I am not sure that if I would got horrid nightmares too or not.
2: When I was in the 10th grade, I had really bad sleeps, I had horrific nightmares and for a few months I sufferd from insomnia. After a few time I realized It was because of the huge amount of stress that I had.
Now days , to avoid nightmares and insomnia, I meditate before sleeping to calm my brain and turn of my thoughts.