aight, the benefit of durburz is that he has 3 might, 2 will and 2 fate, extra courage, and with an extra large stand fast range , so he is really good for holding your army together (but i dont know how useful this is now you have more heroes in your army with the new rules).
Id use the dragon over the watcher any day.
The dragon (with fly of course) is FAR more maneuverable, so you can get him where you need him, and he can escape from dangerous situations.
He is harder to kill: higher defence, more wounds, and has 3 fate, and can get out of dangerous situations.
He also kills more: higher fight, higher str, knocks down people (so double strikes, which means that this combined with his str, he will kill just as much OR MORE than the watcher.), he doesnt lose attacks as he gets hurt (watcher has lower defense and less fate/ might, so he will end up getting hurt more, thus his attacks will drop soonish, and once he starts losing attacks, he gets hurt more and more).
the dragon is more reliable: he has higher courage with 3 fate (although the dragon could leave if he takes a wound, his might and will means that this isnt really an issue, plus the dragon wont even get hurt as much to begin with)
and finally: the dragon can lead troops (and his higher courage means he will help ur gobs stick around to). so if you take a watcher, you also have to take a hero to lead troops, which means that you have to pay at least 285 points to get the monster and lead some troops, the dragon is 15 more (cause he is 300 total), but because of the above reasons it makes it worth while.
so out of the big 3 monsters in moria (Balrog, Watcher and Dragon) the dragon is by far the best.
so a list:
durburz 60
12 gobs with shields or spears 60
Shaman 45
12 gobs with shields or spears 60
Captain 35
12 gobs with shields or spears 60
Captain 35
12 gobs with shields or spears 60
Dragon with fly 300
7 gobs with shields or spears 35
750pts
11 might 60 models
you are quite low on numbers, so be aggressive with the dragon to make up for that
if i was to make a list id probably not get a big monster as they are often too many points for a 750pt game, but that doesnt mean you shouldnt try
you just need to be killing as many things as possible with the dragon, and keep all the goblin heroes out of combat (they must not die). I took a dragon to a 800pt tourny once (old rules), it worked quite nicely (but the trick is to not have your dragon doing nothing, if he isnt fighting, then almost half your points are just sitting around doing nothing)other options are to take Druzhag with shelob and some bat swarms instead (cheaper, so you can fit in more warriors and get more shamans, but much harder to use)
Druzhag
11 goblin archers
1 bat swarm
Groblog
6 Goblins with shields
6 Goblins with spears
Moria goblin shaman
5 Goblins with shields
6 Goblins with spears
1 prowler with shield
Moria goblin shaman
3 Goblins with shields
4 Goblins with spears
5 wargs
shaman
5 Goblins with shields
6 Goblins with spears
1 bat swarm
shelob
a tricky list, still not sure if i want the wargs, and if not what to do with the points
over all id say stick to the dragon list, its much easier, and less stuff to go wrong (just keep that shaman alive!)