The Dragon Slayer is indeed a challenging encounter, but there is a solution. You will need Wisdom level 3, Earth Magic level 3, and the Blind spell. Here's how to do it: at the beginning of the battle, cast Slow. Then, cast Blind on the Nagas one by one (do not attack those who are "blinded," or they will wake up). Next, select one group of Nagas and start killing them with ranged attacks from your Wizards (I had 610), Titans (I had 59), and, if necessary, Goblins (I had 1570). If the enemy gets too close, cast Slow again and move to another part of the screen, then methodically finish them off. If you don't have these spells, the situation becomes much more difficult, and the chances of winning decrease, but there is still a possibility. You can try placing barriers on the paths that the Nagas can use. If the entire map is just a field, then Elementals might be the only help. If you can't find a solution, the only chance to win is to replay the scenario (I first played the Fairy Dragon scenario and then the Rusty Dragon scenario).