The red flag that popped up when I read this was:
QUOTE
he stops breathing in his sleep (to make the monster go away) and gave me quite a scare
If he's litterally sleeping and he stops breathing on a regular basis that is an indication that he is suffering from some kind of sleep disorder. Maybe I have this wrong. Reoccuring nightmares can also indicate some level of post trauma. It is possible your friend has some kind of condition, neurological or psychological, that should be at least examined by a doctor.
Just a suggestion you might run by him.
Aside from that I wouldn't try any magickal route to start, except maybe to help the process. I would simply have him record his dreams involving this shadow character, have him ask himself questions like "how am I like this shadow figure?", "What does this shadow represent?" Things like that. He could even write the question down on paper before he goes to sleep and place it under his pillow.
Nightmares can often represent our personal insecurities, fears, anxieties. Qualities about ourselves we don't like to talk about because they reveal self-doubt, low esteem things we aren't really proud of, even if they are pretty minor things. The nightmares could simply be related to a fear of sleeping in general. Sometimes the vulnerability of sleep scares people.
One thing you could have him try: Before your friend sleeps, have him cleans him self, then his room. He could walk in a circular fashion around his room touching random things as he goes. He could walk a number of circles, the number can be something special to him - 3, 7, 13, etc etc. At the same time he should say something (and say it with passion) like "This room is mine, pleasant dreams will be mine" By doing this he will reinforce his own will in the room. He will reinfornce the notion of not having bad dreams. And if it works, he won't have bad dreams. But he can't be afraid of sleeping or even afraid of the nightmare because then all this ritual will accomplish is dizziness.