You're playing with the 1.2 patch? That means avoiding his flames at all cost. I found that staying high up on the stairs, near the top of the tower, but out of sight, and shooting arrows at him from there, worked well. Also, wait for him to land and get busy fighting the guards, and then power attack him from behind or at his wings.
Wait the 1.2 patch makes the breath epicly powered?
Whew. Thought that Blood dragons weren't going to be any fun at all.
does it do the same for all magic?
Only I got pulled apart by a fort full of mages. Ended up getting lucky when they all hung out on the wrong side of a barred door leaving me to use magic/summons through the door with impunity.
Also: Hire a companion. You should be swimming in gold. It's pretty easy. I made 15000 without going overboard selling loot, just by picking up gold from drops in the first 10 levels and selling gems. Which weren't worth all that much.
One of the patrol is invincible, provided they don't get killed by you. Essentially the three of you should be able to take him out.
Oh. And JUMP up onto the paraqet.