Plot
Set one hundred years after the first film, Damodar is revived after his defeat by Ridley Freeborn, having been cursed by his former master, Profion, to walk the earth as an undead entity. Driven insane by the curse, he seeks revenge against the kingdom of Izmir and the descendants of those who defeated him.
After years of searching with the aid of two dark-talon lizardfolk shamans, he locates the Orb of Faluzure, an ancient artifact linked to the power of Faluzure, a dragon god imprisoned under Saragasso's mountains. With the Orb's power, he heals the curse and prepares to awaken the dragon to destroy Izmir.
Lord Berek, a fighter and former captain of the king's guard, now a bored lord of the King, and Melora, his wife, a young mage, investigate reports of poison gas emanating from Saragasso's caves and find the still-slumbering dragon. Researching the threat in Izmir's library, Melora excitedly reports to Oberon, the head of the Mages' Council, that Faluzure was imprisoned three thousand years ago by a powerful ancient civilization called the Turanians, who also created the Orb. While trying to locate the Orb through magic, Melora is cursed by the much more powerful Damodar, and begins dying slowly.
She hides her illness from Berek, who is appointed by the King to assemble a party of adventurers; small enough to infiltrate Damodar's lair undetected, but strong enough to face their enemies: Lux, a female barbarian, Dorian, a male Cleric of Obad-Hai, Ormaline, a female elven wizard, and Nim, a master thief. Together they resolve to locate the vault of the warlock Malek, a worshiper of the demon Juiblex who was gifted a magical scrying pool known as the Pool of Sight; Berek believes the pool will allow them to penetrate Damodar's defenses and reveal the orb's location.
The party sets out to locate Malek's Vault, while Oberon and the other mages try to decipher the tomes of Turanian magic in their library, to find a way to defeat the dragon. While traveling through a haunted forest, Berek's party catches the attention of the powerful lich Klaxx the Maligned, who offers his services to Damodar. Damodar does not trust him, but is confident that the Orb makes him more powerful than Klaxx. After confronting a white dragon, and losing Dorian in the fight, Berek's party finds the Pool of Sight, securing their way to Damodar's castle. Confronting him, Berek manages to take advantage of his overconfidence and steal the Orb, though Ormaline and Nim are badly wounded before the wizard teleports them to the Temple of Obad-Hai. While Ormaline and Nim are treated by the clerics, Berek rides back to Izmir, Lux staying behind to delay demons summoned by Damodar.
Using his shape-changing abilities, Klaxx infiltrates Izmir's castle, kills Oberon in his bath, and assumes his shape. When Berek returns with the Orb, Melora uses it to unlock a vault discovered beneath the castle, where the Turanians hid the secrets of their magic. Klaxx reveals himself, stealing the Orb back and killing the King and many of the castle's inhabitants before returning the Orb to Damodar. Falazure awakens and destroys the Orb, regaining his godly power. Damodar asks Falazure to witness the city's destruction and to let him rule over its remains as Falazure's servant; the dragon god agrees, but demands tribute in the form of 100 human sacrifices for every new moon in honor of his release, to which Damodar also agrees.
While Berek rides in pursuit, Melora, who is near death, manages to decipher the Turanians' secrets and gains the blessing of Obad-Hai, who gifts her a new Orb. Berek and Lux meet up and confront Damodar, who no longer has the Orb's power. They force him to cancel Melora's curse and she rallies the remaining mages in a magical attack that defeats the dragon, sealing him away once more. Klaxx, who has no interest in helping Damodar, disappears with a laugh. In the aftermath, Izmir is rebuilt, with Berek immersed in his ministerial duties, and Melora appointed as the new head of the Council of Mages. Lux, is shown to have fully recovered from their wounds. Nim and Ormaline are shown being approached by Dorian, implied to have both died and gone to the outer planes. Damodar is imprisoned in a dark dungeon beneath Izmir, but smiling to himself as if he is fully prepared to wait another hundred years to have his revenge.
