There is no point in building dwellings for improved creatures in the Knight's Castle. Unless it's the cheapest ones, just to increase the town's level. Anyway, they all need to be turned into undead.
It makes sense to build a Castle and a Capitol (or a Magistrate, if the Capitol is available in Mythgard). And the creatures should be built at their base level right away – this way, there will be more undead later, and you can transport them to the converter to fight Godric. Although, when I played it for the first time, I built all the upgrades in the human castle and fought Godric with humans – there were no problems either.
