Have you ever considered applying USM in post to your JPEGs, instead of relying on the in-camera sharpening?
In this case, for starters, I'd try some local contrast enhancement using USM. Maybe something like 20/50/0 as a starting point though you'll probably need something stronger to come close to the NEF version you have there. Save the normal sharpening touchup at the end -- I often go for somewhere between 70/.5/0 and 100/.5/0 myself (after whatever other stuff, including a touch of curves and LCE).
As for the D70's own JPEG vs NEF, I think the difference is quite noticeable (though not usually quite *this* different), but if you're not printing large, it probably won't matter -- just apply a little touch-up in post. OTOH, Paul did apply some post USM there. If not applied, the difference probably won't be quite *that* big.
I don't know if it is just me, but why would you compare picture run through USM to unedited picture; whatever the format. It doesn't make sense. Why didn't you post the picture of castle in JPG and NEF unedited so we could have better understanding. There is a clear difference in castle pictures but I barely see anything in full view.
Sharpening in camera set to "normal" is not "no sharpening", so some pretty extensive sharpening is applied in camera.
difference in highlights (false colouration, white balance) and difference in contrast, especially in highlights, are quite obvious, too. Midtones in processed NEF are slightly higher, and contrast in midtones is lower.
Hasn't this been the common wisdom since Raw was introduced. The idea is that a big desktop (or even small laptop) computer does a better job of sharpening (etc.) than does the little computer that runs the internal camera jpeg engine.
The settings (normal, more, a lot more, less, a lot less, and none) give you only 5 steps of sharpening, so what happens if the optimum sharpening is obtained between two of those settings? The picture comes out either over sharpened or soft.
I my most humble (and not stuck-up either*) opinion, the best sharpening is not done by a single application of USM anyway.