Also, if you're going to have totally rediculous encounters like this, you need a PROPORTIONATE REWARD. There is nothing of value in this entire dungeon. If you're going to make a level 3 party fight a boss with 125hp that can wipe your entire group out in 1 round, and has potentially 15 or so allies, you should offer a big, proportionate reward. This is DM'ing 101.
