I seem to remember in the changelist for beta 4 that the rewards for various quests/goodie huts etc were now going to level with the difficulty.   If it was a low level of difficulty then you would get a low level item.   If it was a high level of difficulty - and a dragon's lair was listed as an example - then you would get a much better item.

I just defeated the dragon defending a dragon's lair.    It was a tough battle.   When I won the reward was a pair of leather boots armor value 2.

I was at least expecting some kind of magic weapon, armor, item, etc.

Is this really the reward that was intended for this type battle?