The Battle
Nelo always begins battle with a taunt - you have sufficient time to reach him before he recovers, so move in and get a free attack on his front. For the remainder of the battle, you can create an opening at any time by running up to Nelo and prompting his 4-Hit combo as a response. Run away far enough to evade the 2nd sweeping slash (which has the greatest range), then wait for Nelo to complete the combo - he will always taunt after completion of the 4-Hit combo, giving you an opening to attack his front.
To attack Nelo, you should use sword combos, since Air Raid and Vortex are all but useless in this fight. Unless you know how to sword-cancel (more on that later), Nelo will block you after just a few slashes.
Once Nelo blocks, there's a few things you can do. You can continue to wail on him in DT mode until his block breaks, though this is something of a waste of DT since a lot of your blows will be negated by Nelo's block. If you wail on Nelo in non-DT mode, then Nelo will usually respond with the overhead slash or High Time combo when he emerges from his block - if it's the former, you can move forwards and continue to pummel Nelo. If it's the latter, then it's more dangerous. You can parry or jump away from it, but you only just get time to do either of those actions.
Alternatively, you can wait in front of Nelo until he unblocks. This is much less risky than it sounds, really. If Nelo goes into his 4-Hit combo, then he will hold his glowing blue sword upright for a second first - if you're in front of him, it is easy to stun him with a regular sword slash while his sword is held upright. Often Nelo will just teleport away - if he emerges close to you and charges up a blue meteor, you can attack his front if you're close enough.
Stinger Lvl 2 is a useful Alastor ability to have, as you can throw Stingers out at random as Nelo is walking around. Sometimes you can strike lucky and stun Nelo this way; other times he'll counterattack, so jump away from him if that happens. You shouldn't use Stinger at close-range, i.e. when Nelo is taunting or stunned, however, as otherwise he will block you with the very next hit that you do.
It's also possible to attack Nelo from behind, i.e., on his back, though this is easier with Ifrit's flame-kick than it is with Alastor. If Nelo blocks, you can try jogging around behind him. Expect him to teleport frequently if you do this, though sometimes you can get in 1-2 slashes on his back. Otherwise, it's better to jump over Nelo (while he is charging a meteor, say) and attack his back that way - as long as you connect, you can get in about as many hits as on his front.
You should never try to fight a long-range battle against Nelo, as he becomes very dangerous if you run away from him - his sliding dashes from offscreen are silent and deadly. You get time to jump away from him, but only just. Nelo may teleport a lot, but he rarely goes very far away from you. You should use his attacks to punish him - if he does a sweeping slash, for example, jump backwards from it. You should end up close to Nelo to get him on the counterattack as he recovers.
You can play quite the parrying game once you get familiar with Nelo's attack patterns. It's fun to parry Nelo, and to prod and poke at him. For a beginner, though, I would play it much more safely. As long as you're patient, there are loads of openings in this battle. Never try to wail on Nelo as he's walking around, but wait until he's taunting, stunned, or recovering from an attack first.
Nelo will normally block you a lot in this game, unless - with Alastor - you use sword-cancelling. For Nelo 1, you can get in up to a maximum of 18 or 19 slashes before he blocks, though Nelo does "remember" hits - if you want to reset his remembered hit counter to zero, then wait until he charges up a blue meteor or teleports, as both of those will do it.
For a truly devastating strategy, you can combine sword-cancelling with Nelo's blue meteor glitch to create an infinite sword-cancelling loop. You can force Nelo into charging up a blue meteor if you jump backwards from him in a certain way after slashing at his front: you must flip backwards up high and steep - if done right, Nelo will start charging up a blue meteor, and you can quickly run forwards and start slashing at his front again... >_>
The only way Nelo can break away from a blue meteor + sword-cancelling loop is if he teleports up to a higher level (Nelo 1 fight only) or if you mess up - otherwise, the loop is infinite. However, it's also pretty much overkill for Normal/Hard modes, really. It's most useful when going for SBs and you want a safe battle.
For Ifrit strategies, refer to the Nelo 2 battle. Any of those Ifrit strategies will be applicable to Nelo 1.
