Yes, this creature exists and can be seen by selecting Nightmare mode level 1.
Loot drops are 10k gold, Amulet of Zaw and two wands of wishing.
This creature can be easily defeated with a melee weapon and one potion of ludicrous speed.
Anyone trying to fight this thing with melee attacks will die, deal with this huge dragon by throwing a gas gem or frost gem at it and run away. Be warned! This creature breathes death and hits like a truck, (this attack far surpasses the damage dealt by a wand of death and finger of doom). This image demonstrates the dragon's power; my character, (who is an archer), walked into the dragon's den and lost 113 hp of 119 from one attack.
As you can see I have speed 2 (ornate rod + speed boots) and got the first attack regardless of that. You could guard against this attack if your character is a skeleton, but if you are a giant skeleton (see page).
I will try to get a better image of this dragon and an actual tattle of this creature, but in the meantime, again I stress that players be careful and approach this creature with EXTREME CAUTION!