I fought this battle just last night. Yes, it's tough, but not too tough.
First of all, completely buff up your party prior to entering Malavon's place. Be certain to cast Chaotic Commands or Potion of Clarity on as many of your party as possible.
When you enter Malavon's place, nuke the 2 UH's in the foyer as fast as possible. Should be easy to do.
Next, Summon some tough monsters. Go right into the next room with the summoned monsters leading the way. They're gonna be your cannon fodder, meatwall.
Send in your toughest character to get Malavon's attention and start the battle. After the end of the conversation, run back to the rest of your party and ignore Malavon. The Iron Golems and more UH's will charge your party.
Have your fighters engage the golems. Have your spell casters start firing off area effect spells to take out the umber hulks. All in all, this isn't really that tough. Just intense.
After cleaning out the IG's and UH's, keep your party in this same room. Send in your toughest fighter charging into the next room after Malavon. Yes, you'll take some damage from his cloud attacks that are still lingering, but this "Malavon" dies rather easy. After killing him, charge back to the rest of your party and wait for the real Malavon to pop in.
When the real Malavon pops in, throw everything at him. He seems to have a globe of invulnerability up, so most magic is out. Just keep whacking him with good old melee and ranged weapons. It'll take a while and you'll run around a little, but keep the pressure on and he'll drop sooner or later.
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