The answer to 'why didn't Damian...' is 'because it is a game'.
As logical as Damian showing up and killing you may have been, that would not have made a good ending for the game. You would not reasonably have been able to kill Damian (you being a relatively newly hatched dragon knight and him essentially the incarnation of a god), so at best Zandalor would have had to show up with backup to stall him long enough for you to get to the Hall of Echoes. Which would have just brought up the question of why Damian didn't bring his own backup, etc.

The rational behaviour for the main villain in most games would be to send out their strongest minions when they hear about a chosen one who is destined to defeat them. What they do, however, is send out weak minions first, and then gradually send out stronger and stronger minions.

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There was originally going to be a Broken Valley type area around Aleroth in FoV, but it got cut due to lack of resources (it would have delayed the release by the better part of a year). They decided the game overall needed more of a human hub of activity than more wilderness to explore or fly around, so that was what they focused on.