Did you try taking out the nests with Fire Sphere?
Did you check if you have any dragon equipment you can use? There is some you'll want to get in the battle tower, after that fight, but there is some you can find earlier.
If you explored the start of the fjords before the final section where you take over the battle tower, you may have a dragon skill book in your inventory (or an extra skill point, if you read it earlier), which you can use to get the dragon healing spell.
Did you try reloading a save before exiting the battle tower, or the autosave made once you get outside in dragon form?
I found that after about level 4 or 5, the ranger starts to become a lot more effective. In part that was due to a change in approach, as I started off using unarmed combat as a fallback when opponents got close, rather than breaking off and attacking again from a distance.
I played a warrior in the original release of D2:ED, though, so with the balancing changes it is hard to make a direct comparison with DKS/D2:DC builds.
