It is difficult! Before I'd read a handy guide I often struggled even on the easy difficulties. I think I played on normal last time through but that's about as difficult as I can go. I still suspect Ego Draconis (before its revamp into DKS) probably holds the record for me dying the most often.
I wasn't aware of Talana's reputation, though as a dragon knight I figure it speaks for itself, but my thinking was indeed that she was already significantly weakened, enough to have her will and wits hijacked; but the clarity of that thinking is perhaps debatable as I'm not sure how I'd reconcile my other theory that she was already dead with being able to take on her dragon powers, though that is with the assumption that there actually was something and it wasn't just another ruse by the other person. But it's hard to say if the writing and concept were even that in-depth, sometimes they are, sometimes not...