The fight with Zagan was pretty tough, but you can certainly make it beatable. Here are some tips that i found helpful:
In the upper part of the cave there is a door. If you fly up there you will be transformed into your human form and you can then rest and heal as much as you want. You can injure your enemies a bit, fly up there, rest and then repeat.
You can also use potions in the dragon form.
Use your special abilities, not your usual dragon breath. Put some dragon skillpoints into summoning a vywern, also don't neglect your homing fireball skill, it's very powerful. Another skill, that i found very useful as a dragon was healing.
Last but not least. Don't forget to dodge your enemies attacks.
