Yes, the fact that Nervous dreams that he is being consumed by the flames himself is worrying, isn't it? But careful examination of his other dreams will show that he often puts himself in the place of the victim. Whether that's the case here, or his life is really in danger, well that remains to be seen.

The Beakers have cruelty down to a science (teehee). Do you really want them to stick around? Well, it's good to have a villain or two, isn't it? We'll see what happens...

Olive's feelings for Nervous are much more like ownership than anything, but maybe she really does love him too. He is her son.