I got the same thing, but I couldn't tell if it was  intentional or not. I kind of suspected what was supposed to make him unique and difficult was the fact you couldn't use magic or special attacks on it it directly. Obviously, if that is the case it needs to be more clear so it doesn't resemble a targeting error.

I will also add, that upon killing the worm, the territory did not open up to be claimed. The sparkly altar says you must build a monument there to claim it, but the region was still under enemy influence, and therefore unable to be built on. I assume the idea is to build an outpost there to claim the altar.

Yes. The issue  was even after the region is purged of monsters, and the main boss is destroyed, the territory didn't go neutral.  You can't build an outpost on owned territory, and the influence of an outpost or city built outside of it, wont penetrate into it, so it's impossible to build on the required location.