Why I like Dungeon:
Dungeon is a very good town for lots of reasons
First of all you have a town with three flyers, two ranged units and two-foot soldiers, which makes it one of the best for siege attack.
However you are in good position too in siege defense because of the durability of your ranged units, a very good foot soldier, (Minotaurs), and a good help with the Harpy Hags loop attack. This allows you too to be aggressive in the battle in most cases, allowing more double damage attacks for your Dragons, and a fast neutralization of the enemy ranged units, (specially good if you have Tactic advantage).
Other reason is that you have one of the best 7th level creatures in the game, the Black Dragon. You won't have an easy time to get them in your town but when you get them they are the most important unit for you. Their magic resistance and their double attack make them quite useful for quite wide diffirent tactics.
More reasons are the special buildings of your town, which are perhaps the best of all towns.
I like especially the Mana Vortex, very useful for both might and magic heroes. The Artifact Merchants can be a good way to supply your heroes with needed artifacts, but later in the game, (because you will need lots of money and resources at the start), and the Portal of Summoning can be great if you find a good extra town dwelling, specially if we talk about Black Dragons, (though I confess I don't use it very often because it's not usual to find these dwellings).
The last reason is heroes, Overlords and Warlocks are both very interesting heroes classes with different tactics to follow but both can become very successful.
But the most important is that the individual heroes no matter if they are might or magic are great, with great specialities, good starting skills and secondary skill development, and good starting armies.
Gunnar is one of my favourites with his Logistics speciality and his Tactics skill, (which I think are great skills for Dungeon heroes).
But the magic hero Alamar can be a great choice as a starting hero because with his Resurrection speciality and the Scholar skill he comes with, he can easily teach Resurrection to other heroes you hire, (and can become a great main hero too).
However no matter which hero you choose every of them are at least good as secondary heroes, with diffirent skills that can be very useful, (+350 Gold, Scouting, spells which can be taught to your heroes...).
Now I'll comment the units of your town:
They are just average as level one unit. Useful in early game.
Good when upgraded. In fact this is one of the priority upgrades in the first week because you will need them to clear mines in company of Trogs. With the upgrade they gain most of all speed, and a useful loop attack, (but sometimes it's not so useful).
These and Trogs must be the one you use in the first two weeks to clear mines, so when fighting against ranged units, you better use them by splitting them in some stacks, one or two with some good numbers of them, and the rest, (two or three more stacks should be enough), with just one of them to get next to the ranged unit and not letting them use it's ranged attack.
Later in the game they will be useful in siege attack and defense because their special attack, but only if you have high numbers of them, or they won't do enough damage. In fact, that's their big problem, they make very low damage. Blessing them is good if you have the spell, (and be afraid of curse because it will make them to do insignificant damage).
These are good three level units but they are very very expensive. There's no big deal to upgarde them fast as they are quite good even without the upgrade.
I don't buy them in the early game just because they are so expensive and they make very low damage.
In fact they are half way between a foot soldier and a ranged unit, because they are very tough, and have no melee penalty, but make very low damage.
They are just really useful for long battles because they will suffer and you will still have some of them surviving, or when you have lost of them, because they will do a good damage then. I prefer not to buy them until week three at least, until then they can be a great defense for your town if an enemy hero wants to attack you. Bless is again a good spell for them.
Don't buy them if not upgraded because they will get without shots too fast.
This is other of the priority upgrades, because they are one of the best units in your town and you need them using their ranged attack all they are able. Other tough ranged unit without melee penalty, which won't die easily. In addition they have a valuable skill, (petrifying), which can be very useful specially knowing that they have no melee penalty. So if you can't make a ranged attack don't worry to use their melee attack. But be careful when attacking higher level units, don't always confide in the petrifying skill, as it won't show up very often. Don't risk them too much and attack high level units preferably if they can't counterstrike.
This is your second best unit and your great foot soldier. They can even face stacks with higher levels, have a good speed and very good attack/defense stats.
They will have extra turns in battle because their +1 morale ability, which is great.
These units greatly benefit your army when you have Tactics advantage, because they will be able to reach the enemy units in just one turn which is great, (your flyers won't suffer so much with them near). If you can Bless them, do it, because they have a great damage range, (12-20).
Their upgrade is not a big need early because they are very good without it. You better concentrate in getting your Dragons or levelling up your Mage Tower, (a big need if you are a Warlock).
This is perhaps the weakest unit in your army, with very low stats for a sixth level unit. However their advantage is being a fast flyer with a good skill, (paralyse).
But the same of the Medusa is applied here, (even more valid), don't confide in the ability because it won't show very often, (or will show up but not when you need it).
Don't risk them too much if the situation doesn't need it or you will lose too many of them, try to attack when your enemy has lost the counterstrike, specially when attacking sixth and seventh level units.
However it's not always possible because as a flyer you need them to go fast for the enemy ranged units, (even more in castle siege), so you will be hit by their foot soldiers. Use the wait-attack tactic if possible, give them the Minotaur support, or resurrect them often.
Red Dragons/Black Dragons
Your best units. You need them as soon as possible. However it won't be easy because you need lots of resources to build up your town until get them.
Their double attack is a very good speciality to fight in an aggressive way, (if you attack with your Dragons before your enemy has moved their units you will have more probability to use that attack). But it can have a double-edged effect because you can kill your units if you aren't extremely careful.
Always place your Dragons next to your units, and don't let any hex between them, or any enemy stack could attack your Dragons and you would kill your own units in the counterstroke :( .
The magic immunity is an advantage in average. With Black Dragons you won't be able to boost them with beneficial spells, but they won't be vulnerable to Blind, big damage spells nor negative spells, (Slow, Curse...), so you can always count that they will always have a good speed, damage stat, attack and defense values...
The same is true for Red Dragons, though they will be vulnerable to fourth, and fifth level spells, yours or from the enemy. The big advatge of that is that you can resurrect them, (great). The upgrade is a must, the sooner the better, being the only exception if your main hero is a Warlock with the Resurrection spell, (perhaps with a speciality in that). In that situation you better not rush for the upgrade and concentrate in levelling up your Mage Tower.
Note that one of the best spells for your units is Bless though a Mass Bless is not
probably, because Warlocks rarely get Water Magic and Overlords can't get it. You'll have to learn to fight with what you have with.
One of the big disadvantages of Dungeon is its slow building up, and the need of big amounts of resources and money. You can easily last three weeks until you get Red Dragons.
You first goal will be to build your Capitol, (unless you play easy or normal difficulty level in which you will already have quite a lot of money and there's no need for such a rush).
You are blessed if you get it at the end of the first week, but in average you won't get it until the start or mid of week two.
Then you better build up your town to get Dragons soon, you will be lucky to do it in week three. When you have them you can go for your Mage Guild if your main hero is a Warlock, or upgrade the Dragons.
By that time you can easiy have entered the second month, so until that you will have to be careful with the possiblity of an enemy attack. Other towns develop faster so perhaps they will have higher level units if they attack you early. But if you have resisted and you have developed your town and main hero, then you have a great hero, with a great army, and useful special buildings.
Now is your time, go for the enemies and slaughter them ;) .
Why I prefer Overlords:
Now I'll show some of the reasons why I prefer the Dungeon might hero, the Overlord, over the magic hero, the Warlock.
First of all the existent Overlords are good heroes, with good specialities and starting skills. They come with good starting armies, which is a big help in the early game.
They develop very well the secondary skills so you can get most of the useful skills for might heroes, and is quite probably to get two magic schools, one of them Earth Magic surely, (great).
You can't get Water Magic school however, so there's no Mass Bless or Mass Dispel or Cure :( .
That's not a very positive point but it's not definitive, you can fight without those spells getting advatage of your good might skills and your probably two magic schools.
However Warlocks are very good heroes too, they come with good specialities and spells, which can be very helpful in the early game to clear mines, (while Overlords come with armies, Warlocks come with good spells).
They develop well the secondary skills with good probability to get three magic schools, (Water is not probably too), and they can't get resistance, (not a great problem).
However they have a higher probability than Overlords to get a second class secondary skill, like Eagle Eye, Mysticism or Estates :( . But this is not a definite reason to get Overlords or Warlocks, as they are quite similarly good.
Overlords are quite balanced.
They develop most of all attack and defense but they will have decent spell power and knowledge stats.
So they can become good magicians with time, especially if you supply them with some good artifacts to increase spell power.
I've said spell power because knowledge is not a problem for an Overlord.
Remember that you have the Mana Vortex, which in addition to a decent knowledge stats, and perhaps Intelligence as secondary skill, (is a very good skill for Overlords, and it's not impossible to get), and probably any artifact with +1 or +2 in knowledge, means that you can have even more spell points than a magic hero from any other town.
Warlocks however are pure spell power, and the magic is the only way they can become great heroes.
One of the great problems for Warlocks is the lack of high Mage Tower levels early in the game, (specially if you play Expert or Impossible), because you will need lots of resources and money to develop your town, (huge amounts of wood and sulphur and quite gems and ore too).
That will let Warlocks in a very bad situation because they need good spells to resist the attacks of other might heroes or magic heroes which can get spells before than you, (most of the towns).
In the line of the previous reason, Warlocks have a great spell dependency so even if you develop your Mage Tower but don't get good damage spells then you are in big, big trouble, because you have to conquer other town, and pray to get the Mage Tower at least with level three, (if not you will spend lots of resources again and that means more time), and get any good damage spell.
Of course if you wil get Armageddon in your starting town, then you are blessed by the gods and you are a big trouble for your enemies. And if you can get other spells like Meteor Shower you can face your enemies without fear but if not you better pray.
These reasons make Warlock very weak in the early game.
They will probably be better than Overlords to clear mines in the first two weeks because of their starting spells, (Overlords won't have it easy if you don't waste too much money, which you need to get fast your Capitol and Dragons, in units like Beholders).
But if you start closed to other towns faster in development, (most of them), you can be easily killed without having even the third level of Mage Tower if they attack your Warlock early. Overlords however can spend some money to get units, and resist better, (or even attack), in those situations.
In conclusion though a high level Warlock with good spells is a formidable hero you won't easily get that situation, being very weak in the early game and depending a lot of the spells you get in your Mage Tower.
Overlords however are more flexible and adapt better to every map, and they will become good magicians with time, without any apparent weakness.