I kept the phoenixes in the castle specifically so that the mission wouldn't end quickly – I wanted to level up Faelan. Nicholas couldn't flee the battlefield because of the shackles, but he would respawn in a random location after each battle, immediately capture a town, and stay there until Faelan arrived. If my support hero was nearby, he would attack, but he wouldn't stray far from the town. This continued until I defeated all the dragons. The last time, he respawned near the nearest Necropolis town to my cities.