No boss should be doing 1600 a hit, it sounds like you've found the persistent bug with crazy boss damage in DKS.
Zagan himself isn't actually hard, it's the Demon Bosses that spawn in from the nests which have the Dragon Blast spell that are the real threat. That's because there's no room to avoid that spell in the small cave and the Dragon has no good healing options.
DTP = Dragon Terror Patrol.
Thanks. When I encountered Markthum and the others I was above level 30, and he's level 22. I almost couldn't believe it when he instantly one-shotted me but I checked my combat log and sure enough, 1600 + damage every time,and one of the others was also doing almost as much damage. There were also a few other fights that seemed almost as imbalanced.
As for changing into dragon form to kill the DTP I found that I could change into dragon form in that area but couldn't kill anything that isn't flying. At no point in he game could I kill enemies on the ground while in dragon form, in fact I can't even see anyone on the ground in dragon form.
You're right about Zagan. I took out the nest towers right away but trying to fly around and kill those Demon Bosses was almost impossible, I would just get killed in a few seconds.I got through it by flying up to the exit area to heal, then doing as much shooting as possible. Some of them fly into arrow range when you stand there, but to finish the fight I had to jump in, score one or two hits, then quickly fly back to the ledge to heal, then repeat over and over. It took a very long time.
This is why it puzzles me when people say they breezed through this game in 40 hours or less. It was some of these imbalanced fights that I found to be serious chokepoints, and it's not entirely because of the way I designed my character because if your character is doing well you shouldn't just instantly get one-shotted suddenly by some surprisingly overpowered enemy. If my character was adequately prepared for some of those bossfights the rest of the battles would be so easy that I probably would get through it in a lot less time but it would be a pretty dull playthrough. That's what I mean by balance problems that could have used a little more work.
OK I just went back to a savegame just before the DTP fight and did it again. Check out this screenshot. Combat log
Just did it again. Almost impossible because Tobelisk one-shots me too, but I did find that I can't shape-shift while the fight is going on, not before or after I kill Markthum. Only after the fight is completed.