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Preheat oven to 375º. In a large pot over medium-high heat, heat oil. Add kale a large handful at a time, tossing with tongs and slightly wilting each batch before adding the next, until all kale is added and leaves are bright green and just wilted, about 5 minutes total. Season kale with ½ teaspoon salt and transfer into an 11"-by-8" (2-quart) baking dish.
In same pot over medium heat, melt butter. Cook shallots and garlic, stirring often, until tender and light golden, 3 to 5 minutes. Add flour and cook, stirring, until lightly toasted, about 1 minute more.
While whisking, slowly pour in milk until combined and smooth. Whisk in mustard, nutmeg, ¾ teaspoon salt, and ¼ teaspoon pepper. Stir in gnocchi. Bring mixture to a simmer over medium heat, stirring occasionally, and cook until thickened slightly, about 1 minute.
Remove pot from heat and whisk in 1 cup Monterey Jack cheese until melted. Return cooked kale to pot and toss to combine, then scrape kale mixture into baking dish. Top with Parmesan and remaining 1 cup Monterey Jack cheese.
Bake until filling is bubbling and top is golden, 16 to 20 minutes. Let cool 10 minutes before serving.