How did 孬 become pronounced "nāo"? 孬 is an interesting character.

MDBG mentions that 孬 is a:


  (contraction of 不 and 好)


From it's structure it is also quite clear that 孬 is a combination of 不 and 好. From an phonetic angle though nāo, doesn't make a lot of sense, especially in relation to Modern Standard Chinese. 

In other dialects I've seen 包 work as a contraction of 不 and 好, which makes more sense phonetically.

How did 孬 become pronounced "nāo"?
Firstly: 孬 is a fairly old character, attested in the Kangxi dictionary. However, the pronunciation there is given as:


  呼怪切，歪去聲。


...which implies modern Pinyin: huài (Zhuyin: ㄏㄨㄞˋ).

Even back then it was known as a dialectal character.

In Cantonese, the character is pronounced as a straightforward liaison, with initial of the first and the final (including the tone) of the last:


  不 bat1 + 好 hou2 = 孬 bou2 


But that can't account for the n- initial; rather the pronounciation naau1 was borrowed back from Standard Mandarin, and only in pronouncing phrases from the standard language.

So, we have to look to another form of Chinese, possibly one of the Mandarin dialects. But we get inconsistent answers from the Internet commnuity: 河南方言, 东北方言, possibly others.

It is also attested in Shanghainese, and I personally think this is the most likely place that the expression originated; on the interface of Jianghuai Mandarin and Northern Wu, possibly where the local cognate of the tag question 好不好 has nasalised. 

Just goes to show, contracted expressions are sometimes lost in the mists of time.