Do we actually need to retake Karag Zilfin though? Just as Karag Nar has been sublet to humans, if the dragon agrees to form an alliance with Karak Eight Peaks, is it really a problem?
Now, I think we'd need to call in Asarnil so that Deathfang can translate and act as an example of productive collaboration between tiny two legged meat snacks and the glorious draconic uber-race, but it would be a pretty enormous coup. An allied dragon would be a pretty extraordinary advantage for Karak Eight Peaks to have.
Now, this may be politically unacceptable, of course, so another option to try to generate elf Favour early is to see if Asarnil can take the ice dragon back to Ulthuan. If I remember correctly, Asarnil's motivaion is to do something so impressive that he can return to Ulthuan in glory while Finubar has to back down and apologise. Dragons are rare and powerful enough strategic assets to the high elves that this might be enough.
If this dragon is female then Deathfang might be pleased to make her acquaintance as well.