I finished my Lunatic run a while ago. The thing about Lunatic is, unlike most things in FE, the enemies and maps actually get tougher as the game goes on. Much tougher. The Final was absolute insanity, with enemies so powerful most of my team needed care to so much as take them on one-on-one. MU was incredibly powerful, having capped like five stats by that point, and could kill them without too much trouble - yet he could only survive about three hits, and most enemies were impossible to dodge.
Inverse, despite having lower stats, had similar offensive power, especially when buffed. The difference is, she had access to Nosferatu. And that made all the difference. With her insane offense and being able to survive just long enough on her own to use it, she could easily heal off the colossal damage from the enemy attacks. That chapter was absolute insanity - yet using the Nosferatu books she and Sarya had joined with, she took on an entire half of the map herself. And it was still insanity. Yet if I had bought more books beyond those two (which lasted about four turns together) and had reclassed other characters such as the even stronger MU to make them also able to use dark magic, it would have absolutely destroyed that challenge.
So the answer is yes. Nosferatu is completely game-breaking, even on the insane Lunatic mode.
Lunatic+, however, is probably a different story. Holy Shield+ lowers the damage output enough that it'd be hard to heal enough to offset the damage, and Counter does more damage than the user would heal. So while I haven't tried it myself, characters shouldn't be able to simply charge into enemies with Nosferatu and rack up easy kills on the enemy phase on Lunatic+. The player phase is easier because you can circumvent Counter with the ranged attacks, but the whole importance of Nosferatu is the easy enemy phase survival.