Update 18 August 2006...
We fought the dragon and prevailed!
Unfortunately one PC died (due to bad tactics), but overall we did well.
Along with two other players, I spent the last week-and-a-half determining optimal spell loadout and which potions/scrolls should be brewed/scribed. When all was said and done, we spent nearly 8,000 gp on magic item creation. The party was buffed 'til we glowed with a carefully selected array of spells with different bonus types that would maximize our plusses to attacks, AC, and saves.
Interestingly, the dragon never used its breath weapon during the fight (!), so I can't say for certain whether it had the typical red's fire breath or something else. I also can't say for certain whether it was vulnerable to cold, due to some extra help the dragon had during the fight (see below).
So... it was a red dragon to visual inspection. But, it had the ability to absorb the energy of spells cast on it that failed to penetrate its SR, then use that energy to augment itself (AC, temporary hit points).
Side note: my hat of SR know no limit!!1!!11! It's a horrible mechanic that prevents half the party from participating in fights. But anyway....
In addition to its spell-absorbing, the dragon was secretly aided by a flying, invisible cleric who was providing it with healing and buffing spells. We only noticed the cleric late in the fight thanks to a natural 20 on a spot roll by a suspicious player's character. We were finally able to target the annoying enemy cleric and neutralize him, then concentrate our attacks on the red dragon until it went down.
In fact, we killed the dragon twice. The first time, she appeared dead, then returned to life in an explosion of flame. (Which would've been more impressive if we hadn't all been buffed with both protection from energy (fire) and resist energy (fire).)
In fairness, however, the first of the PCs to die was also instantly returned to life through the ministrations of a friendly goddess. (This would take way too long to explain fully; suffice it to say that while the PCs battled the dragon, and the NPC armies clashed on the ground, the gods themselves warred in the heavens.)
I think the DM played the dragon fairly intelligently -- B.A.D.D. would've been satisfied -- but he fell into a key encounter design trap, and that is pitting a single foe against multiple PCs. Unless the single foe is ridiculously higher in CR than the APL, the multiple PCs should win easily because of their advantage in number of actions per round.
For example, although the dragon could take a full attack action to savage one of the nearby fighters, she was then subject to two full-attack actions from the fighters plus the paladin's ride-by-attack plus the ranger's Rapid Shot barrage plus three spellcasters' spells. Outnumbered 7-to-1 (or 7-to-2 if you count the dragon's cleric ally), she stood no chance.
I don't want to make it sound like the fight was a pushover -- after all, two PCs died (even if one was instantly returned to life) -- but we are not seriously in danger of a TPK at any time.
Finally, once again I want to thank everyone for their advice in this thread.