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I actually completed this mission just the other day (for the second time, I'm currently replaying all the campaigns). I honestly didn't understand what the problem was supposed to be. I had Agrael at level 28 right from the start (at the beginning of the mission), and he leveled up to 29 during the mission. I just went from island to island, defeating enemies and recruiting my own troops. As a result, I approached the dragons with almost no losses to my army. There were 29 dragons. I don't remember the exact composition of my army, but it was definitely much stronger; I remember having over a hundred succubi. So, I defeated the dragons with almost no losses, and even without using any phantoms. That's the whole tactic.
Yesterday, to be sure, I loaded the save and checked if I was right when I wrote this post. So, I found a couple of mistakes. Agrael was level 30, and my army consisted of: 83 hellhounds, 55 succubi, 15 nightmares, and 10 pit lords; there were 23 dragons, all gathered in one place. Agrael was a master of dark magic, and he went in front of the dragons. He blinded them and then cursed them in every way possible. During this time, all the gates opened, and as a result, the dragons were defeated without any losses.