The Nightmare Dragon
is tough, but not impossible.
It's a shadow so it counts as both an Outsider and Undead (weapons strong against those type will do more damage).
It's weak-ish against ice, has decent resistance to everything else.
Having solid death protection will take the edge off it's death damage, but it hard with physical damage.
So you're going to use healing potions, etc. Like any other tougher bosses.