Dungeon is an evil alignmenttown. Dungeons are built by the warlock and overlordhero classes to act as bases from which to wage campaigns of conquest for wealth and power. Similarly minded creatures are attracted as allies. Other dungeon creatures are in thrall to their masters. Dungeon represents Nighon.
Guardian of Earth - (Grail Building) (+12 spell power to defending hero Dungeon special, else 5k Gold each day additionally, +50% creature growth like other Grail buildings)
Dungeon armies possess a variety of long ranged attacks, have effective damage dealing troops, and have the ability to greatly disrupt the strategies of their enemies.
Upgrade your level 2 creature dwelling as soon as possible: harpy hags have a great base speed (9) and their attacks cannot be retaliated against.
Upgrading Medusas to Medusa Queens is more crucial than Beholders to Evil Eyes, since basic Medusa has only four shoots. Getting an Ammo Cart via capturing a town whose Blacksmith is producing Ammo Carts, or at a War Machine Factory, will help a lot, since Medusa Queen's 8 shoots is still not sufficient for a fierce battle.
[[Bless] your Harpies/Harpy Hags. They have damage range 1–4, and Dungeon is the only evil town with possibility of learning Bless spell. With highest damage dealt, Harpy Hags will be a machine of killing enemies with impunity. Similarly, Curse the enemy's Harpies/Harpy Hags (Slow would also be useful since Harpy Hags have a decent speed).
Haste your Minotaurs/Minotaur Kings. They are brutes which do a lot of damage and you want them to strike at the enemy as soon as possible.
Plus, save obstacles, a hasted minotaur king can reach nearly any point of the battle field.
Or, to not damage ones own units, the Armageddon's Blade (artifact), if tier 7 creatures of Rampart and some other immune units are not part of the opponent or can be killed later.
Dungeon town is self-sufficient in terms of minerals with a Resource Silo only lacking money to profit from level 7 creature growth safe plague.
Although dungeon is quite expensive, it has good magical capabilities (e.g. mana vortex) and powerful troops like black dragons, which are among the strongest creatures in Erathia.
If there is a high level creature dwelling on a map, it is better not flagging any other creature dwellings allowing you to recruit the high level creatures every week from both the Portal of Summoning and the dwelling itself, because units produced in the Portal of Summoning are random every week. For example, if there are Red Dragons and Troglodytes available on the adventure map, don't flag Troglodyte dwellings.
Pros
Two ranged units, both of which have no melee penalty.
Mana Vortex: doubles your max spell points once a week.
Black Dragons are potential for "Dragogeddon" tactic because of their spell immunity. Additionally Warlock gain more power than other hero classes.
Three powerful heroes: Gunnar with Logistics specialty, and Jeddite and Alamar with Resurrection spell.
Portal of summoning may be used to gain additional creatures.
The weekly income with Capitol and the Resource Silo is enough to recruit all the units without any external mines.
By using "Dragogeddon" tactic you can easily overcome Necropolis tactic to accumulate large amounts of "Skeletons" and destroy them easily with little to no efforts.
Basic Pillar of Eyes which is level 3 creature dwelling requires each type of resource, and is necessary to build all higher level creature dwellings, making Dungeon possibly the worst town for playing on Impossible level.
Castle
Rampart
Tower
Inferno
Necropolis
Dungeon
Stronghold
Fortress
Conflux 
Cove 
Factory 
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Troglodyte 
Infernal Troglodyte
Harpy 
Harpy Hag 
Beholder 
Evil Eye 
Medusa 
Medusa Queen 
Minotaur 
Minotaur King 
Manticore 
Scorpicore 
Red Dragon 
Black Dragon