So why is he shown in the games as this giant mindless evil destroyer of worlds who would like nothing more than to invade Tamriel and take it for his own? From what I understand of his realm, it seems that Mankar Camoran's speech about why Dagon should come back and take what back what is rightfully is makes a lot of sense.
If Oblivion wanted a Daedric Prince that could be considered as evil and would stop at nothing to destroy the world, why not use Namira or Vaermina or Peryite? They may not be as powerful, but what they stand for makes more sense than Dagon being a mindless villain.