Pg 171-175 of the main book doesn't even seem to define any shapeshifting powers for the Nightlords to begin with.
The idea that they could seems to have been introduced in Nightlands? Pg 34 has under the Description for Lilith:
Her original form, which she sometimes assumes out of nostalgia
However, the context for that is sort of implied by what she does when she's not nostalgically assuming that form:
In the Nightlands, she encases herself with baroque black armor, and instead of hair, has a "mohawk" that is nothing but a solid-steel blade cresting her head
This sounds like she's still (deep down) actually her original human form, and that her "Nightlady" appearance would simply be using her (inorganic-only) matter-reshaping powers to create armor to wear. Lilith doesn't have any metamorphosis spells to otherwise explain it, the closest (since she knows all 1-6) is Mask of Deceit (NBp136)
The biggest mystery (if she's actually altering real apparance, and not making an illusion you get a save to resist) would be her hair: the implication seems to be that she either shaves her head or covers the hair with the steel mohawk blade while in Nightlady form. If she does shave it, then perhaps it takes her time to regrow her "long, straight black hair". She could easily do so by occupying an Astral Domain in the Outer Plane where time goes by quickly. Or maybe she knows some mage with some obscure fast-hair-growth spell we haven't seen published yet.
So I'd say NEITHER have shapeshifting powers... but to explain why avatars look different, a Nightlord can probably decide on how their Avatar will look when they create it, which effectively gives shapeshifting to an avatar via recreating it.
The main problem is that we don't really have any barriers to rapidly recreating Avatars to prevent Nightlords casually swapping out Avatar appearances. They can just super-easily expel/absorb them much like the Dragon Kings of Tolkeen do with shadow dragons, or like how a superhero might with Multiple Selves.
If there as some "creation time" or PPE cost associated with doing this it might help slow things down.
One idea I had: start out newly created avatars at 0 HP / 0 SDC. Avatars heal 2d6/melee so they'd be up to their 200-500 SDC and 24-74 HP maximums pretty quickly... maybe start them at 0 PPE as well?
This isn't much of a limitation, but it would at least create some vulnerable down time where a Nightlord has to nurture a "newborn" Avatar before sending them out into the world, and would disincline them to just casually recreate them on a whim to alter their appearances.
If we were to give Nightlords some kind of actual metamorphosis power (for those who lack the spell) it ought to be way harder than the spell. Some of the Nightlord, such as Moloch (who knows all spells 1-11) actually do know Metamorphosis: Human (he also knows Insect, Superior and even MIST which isn't even in the Nightbane main book: proof that NB chars can learn spells from other games!)
One possible idea would be to treat Nightlords as having the Deific Power from Dragons and Gods called "Alter Primal Manifestation". This is much more costly but has the advantage of lasting indefinitely. The high cost of using this would also help slow down the casual swapping of Avatars.