Case in point, I just won a game, diplomatic victory, just four turns after I got slaughtered in the above mentioned quest.

You just proved my point. If you've developed 4 level 20+ champions, then what do you need a dragon for? You're already powerful enough to win the game with what you have, easily.

Thus the dragon quest is pointless.

There needs to be something for builders to do. Not every game needs to be won as quickly as possible. I love maxing out my towns and if you are smart about leveling your heroes you can have mid teen level heroes pretty quickly. Turn in quests with as many heroes as you want together, kill monsters with 1 hero with troops that need to be leveled.

Nature's Cloak or whatever it is is also easy to get, the more earth shards the better. I had 4 earth shards in my latest game and that gave me 60% resistance just from that, I put on a ring and voila 85% resistance. You can get more but it's hardly necessary. Buffed to the nines a mid teen hero with a bit of healing can't tank a dragon until it kills itself.

And I like the aspect that AI can also do this quest.

Smile when Markin as level 6 comes banging at you with an Ashwake Dragon, long before season 100. That happened to me, once. 

If I understand the question properly, you are asking: "If you have a single unit that can survive long enough to kill three dragons, what use would you have for another powerful unit"?

I hope you noticed that specializing in powerful units tends to reduce the number of armies you can field, compared to specializing in growth?  From that perspective, do you notice any balancing elements here?

If not, perhaps it's worth pointing out that during war it can be expensive or impossible (depending on a variety of factors) for a single unit to defend all cities?  And perhaps it's also worth noting that your military intimidation factor is essential for achieving diplomatic wins?

NanakoAC, there is a way to recruit Ashwake Dragons (a.k.a fire dragons.) It's a special dragon liar guarded by a special dragon. 

The problem is, it is bugged.. and it never spawns on the map. I thought it should be one of the unique resource for one of premade maps, but it seems it is not the case.

And no, Fell and Storm are not 'lesser' dragons. Both of them are superior than Ashwake in several ways.

Besides that, if they're not lesser, then they should be. the ingame descriptions specifically describe ashwake as the greatest of the dragon breeds

I completely disagree. Maybe you would have a point if you only play the game once, but beating the game one way over and over is boring. The Epic Quests are the reason I play the game.They are the fun part. The rest of the end game can get monotenous and boring, but  switching to Epic Quests once you are in a dominant position keeps the game fun. If anything, I hope they add more epic level quests and tougher Monster challenges that go with them.

Well, even with lore (its description on power compared to other dragons is very vague at best), it's hard to say.

The thing is Ashwake is immune to fire (not 'resistance'. They are completely immune to fire damage.), but then they are weak against Water magic (with -50 water magic resistance)

Both Ashwake and Clambercoil dragon have 150 starting hp.

Fell has 60 starting hp, and storm with 40(!!) starting hp.

Fell has lowest starting armor, then Ashwake, Storm and finally Clambercoil with highest starting armor.

All dragons have 20 starting initiative, while storm dragon has 18.

Except Ashwake which has fire immune but -50 water resistance, all dragons have basic +20 magic resistance in general.

Storm has weakest starting melee damage, then Ashwake, Clambercoil and finally Fell Dragon with highest starting melee damage.

All dragons have fire breath, Storm Dragon has Storm, a strong air-magic nuke. Fell dragon has Contagion, a AOE DOT death magic damage. Clambercoil has no active ability, but his melee attack poison a target (poison III), and Ashwake has nothing.

It's hard to call. Because Storm Dragon's Storm is one hell of uber nuke that actually can out-damage fire breathe based on air shards you have. Not to mention, very few creatures/units have air-magic resistance (the reason air elemental is the best elemental creature, and probably the reason it is not available for summon), while there are quite many things which are immune to fire. But its weakest HP and melee damage are the problem.

Fell Dragon's Contagion is... well... after overall nerfs on death magic, its rather crap unless you have tons of death shards. It's ok against mass-trained unit army, but then, who's using mass-trained unit army against a creature who has overpower, other than dumb AIs?

Clambercoil dragon is probably the best dragon with pretty balanced stat. No active spell, but with its strong bite plus poison works well. Too bad, there is no way to gain this dragon in any way.

Ashwake is.... well, let's say I am not that impressed. Maybe good against armies with fire-damage focused.

I think this made a better end game quest than the current one.   You had to be seriously tough to beat 6 Ashwake's.  Now it is an easier battle with only 3 dragons.   On a side note they need to beef up Waerloga if that is going to continue to be the game winning quest.  My most recent game I went out and nailed him with crushing blow with my high level champ and one-shot killed him.   It was a bit disappointing.   I agree with Tasunke.  Waerloga is a dragon lord so why not have him accompanied by a dragon army?

I've done the Arena once, but stopped after the second combat because I had the opportunity to recruit my fallen opponent in lieu of continuing, which I thought was too good a deal to pass up. I was fine to go into the third round though, as my hero was healing people during the combats. In fact it's funny you mentioned this quest, as it occurred right before the dragon eye fiasco (I had stopped at the arena between dragon idols, because it was convenient). So no, I'd have to disagree with you that this was a harder quest (unless there was something truly horrific in that third round).

As to making W the top dog in terms of quests, I can't disagree with that. He needs to go up, or the dozen or so that you say should go down. Right now, the status quo is silly.

This quest used to be the master quest, hence why it's so hard. Back then you had to fight Waerloga and a pack of ashwakes. The version you see now is actually a nerfed version. To be honest, I usually solo this quest... all you really need is fire resist on a good champ.