You remember the MK tale Love letter from the 9th era, and that it states Anu is the godhead?
Are you aware of the idea that if you try your hardest not to think of something before you sleep, you will dream of that thing?
Well, what if Anu, the Godhead, after each Kalpa, tries his hardest not to think of what he just saw, as it is a nightmare to him, as you stated before. He doesn't want to see it again.He is still unconscious, but aware in a way.
Padomay, could represent to power of the nightmare blowing over him, and the more he tries not to think about the terrible world of what just happened, the more the dream makes it.
Hence, the "battle between" them. Also, the fact that it is near impossible to have the exact same dream multiple times. This not only explains the "battle", but also explains why the relativity the same thing keeps happening, with changes, it explains kalpas. To be an Amaranth, he must have had to live through Nirn at some-point, in a Kalpa. The terrible acts of the world are his worst nightmare, and he can not stop dreaming of it. That is why it exists.