Could anyone give me some tips on how to defeat the red dragon?

To counter the fear effects: either use the spell courage or use units that are not alive (catapults, demons, undead,angels,...)

or play as Grigoris and send him a couple Dragon Slayer adventurers :D

Anyway, he is not that hard to kill if you are ready to loose units in battle and can prevent the fear like said above. Just make sure nobody can "steal" his city from you, the AI likes to have some forces trying to take Acheron down all the time, it usually can't beat him, but if you kill him and leave a few orcish warriors in the city, the AI will take it gladly :mad:

Yeah. Big stacks for Acheron, so you can grab his city afterwards. And heroes are good, they don't scare easily. Of course, they don't normally pick up the exp bonus for whacking him, either.