My favorite GM had a table rule. No one dies unless they did something incredibly stupid, or they want to. (Our characters were each pivotal to the plot. Any of them being dead would have mucked it up pretty badly.)
Trying to take on a ranger 3.5 times the APL is in the first category. Would you also be trying to find a way to dumb down a Wyrm Red Dragon for them? Have him out there in his Leather Armor +X, with his Black Arrows of Human bane. (If you want to be nice, also stack merciful on there; he is a slaver, and dead people net you little profits)
You are under no obligation to coddle them if they want to take the risks. I would be very upfront about this with them, though. "This is an extreme fight, you will likely all die. Are you sure you don't want to get your revenge later?" Then introduce them to the concept of "The List" (The semi-mythical sheet of paper that the characters/players write the names and locations of anyone they are reserving a beatdown for. Once they hit level 7-10 they can come pay him a little visit.)
Personally, I would have them come upon him checking a trap, and the halfling can backstab him, and it turns out to be a makeshift dummy. They hear his mocking laughter from the treeline, and then begins the deadly game of cat and mouse as they try and make it back to town with all their extremities. Maybe the ranger catches one on his own and takes a finger/toe/ear as a keepsake. (Or a eye, a la Kill Bill.)
I normally don't reccomend a GM torment the PCs like this, but once they have been warned that they are outclassed, and this is not an encounter in the adventure; and they continue? Well, then the gloves come off.
This is not about you trying to "beat" the players. that's not the point of the game. But it IS your responsibility to show them that actions have consequences. If they don't it will be a weak, watery, unsatisfying campaign. (Nerfing the ranger is the equivalent of letting them type in IDSPISPOPD (very very old god-mode code from the demo version of DOOM.))