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Act 3

You can only have a max of 20 nightmares out at any time, if you release more, the extras will be lost. The bank of 40 extra nightmares that was here for acts 1 and 2 only stores the new nightmares, whatever they are called.

The best thing to do is use multiple brown house to send kids to when they hunt nightmares, and click one house and clear the nightmares before clicking the next brown house.
http://forum.ea.com/eaforum/posts/list/10375470.page

As for the candy apples, from everything I have read, I don't believe they are meant to give candy apples. Most of the candy apples will come from defeating M'nthster. This link lists the ways of getting apples.
http://forum.ea.com/eaforum/posts/list/10375271.page
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