Generally speaking, the nose should not be used at all when playing the harmonica. You are right, it reduces tone, and it will make techniques like bending more difficult. The key to breath control is a healthy diaphragm and healthy lungs. Using the nose is a short cut that unfortunately will become a bad habit if left unchecked.
Now… if you are a master of circular breathing, then I would say the nose is an asset. As air is going in through your nose and coming out your mouth directly.
In short all the air you breath across a reed should not be diluted by splitting the air through the nose, but if you want to breath in through your nose to take in a little more air in between playing notes, or as a circular breath style, then no problem.
Hope that helps! 🙂