First, consider how "mushy" you want the PCs to be before the engagement even begins. Blue dragons can destroy water, but this one only at 30' range. They can also move fast enough to attack unattended objects (mounts, campsites) and escape while the PCs are busy with other problems.
Cure Light Wounds is far too useful for out-of-combat purposes to avoid getting it.
Now, given the insane spot rolls of dragons, we can probably assume vision at least as good as a hawk. Add this to a 15 WIS, and the dragon just fly around far out of range and watch to see who prays, who casts spells, etc. Readied action: breathe to interrupt spells is just nasty, especially if you are 75' away, so that most of the warriors can't reach you with a charge.
Don't forget the frightful presence; for some reason I find it easy to forget.
Of course, a smart dragon won't land in the first place. After all, it has a powerful weapon with 80' range, presence with 120' range, and the ability to heal itself while it waits for the breath to recharge. How's your party's missile / ranged combat capability?
If the fight is not going the dragon's way, it might threaten to coup-de-grace (or just attack) a fallen PC, unless the PCs back off and allow it to escape.
. . . . . . . -- Eric