Well, my intuition was spot on, at least regarding Night- he made it up! The origin is Indian and M stands for Manoj. His full name is Manoj Nelliyattu Shyamalan, so I've still got the question why he picked Night to be answered.
I recall hearing that he made up the name "Night" as a teenager. I think because nobody could pronounce his name correctly, he decided to make up a new one. Instead of using "Manoj Nelliyattu Shyamalan" and having everybody say it wrong, he chose to use his fist initial and the word "night."
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