Not evil. Indicriminate, and possibly a bad idea, but not evil.
Let's look at the order of events:
V uses his/her/its most powerful spell (Disintegrate) to slay a dragon.
Because of this, the dragon's parent spends all of its wealth to *hurt* V as much as possible. It locates V's family and threatens to not only kill them, but bind their souls and spend the rest of its life fleeing from V.
V kills the dragon, again using a powerful spell.
At this point, it's perfectly logical to assume that, with no other steps taken, *another* dragon will arrive at some point in the future and attempt to carry on this revenge cycle. Therefore, kill the dragon's family.
Now, if the parent dragon hadn't threatened to soul bind V's family and depart for other planes (again, *specifically* to hurt V), I would agree that this was over the top. But given the dragon's threat, I think it's perfectly acceptable.