A few weeks back I was running a party of six monstrous characters averaging CL 11 through the "Old Embers Never Die" module from Dungeon #100. They managed to come face to face the Skeletal Ancient Red Dragon at the end of Act 1 when things got a bit sticky.
In the first round of combat the Troll Rogue was attacked and hit with all six primary attacks (Bite, Claw x2, Wings x2, Tail) and took about 140HP of damage. This took him through all of his Subdual damage and most of his Real damage that he had thanks to Regeneration. Needless to say, the rest of the group grabbed the fallen Troll and ran away never to return.
Looking closely at the Skeletal Template, which appears to be still using 3.0 rules, it appears to be greatly overpowered. The crux of the template is that it can be applied to any Dragon, dividing the original CR by 2. For this particular creature this meant dropping from a CR 22 to a CR 11.
The template causes the original creature to loose all Spellcasting, Breath Weapons, Damage Resistance, Feats, Skills and Fly Speed while gaining Cold Immunity, Bludgeoning DR, and Undead Traits. Natural Armor is greatly reduced, but the all natural attacks all stay the same.
I suspect that there is an error in the Skeletal Red Dragon on page 34 because it appears to still use Dragon HD progression for attacks. I am betting that the attack progression is supposed to change to Undead HD. (BAB = 1/2 HD rather than HD). The template seems to be missing this little detail and it carried over to the sample creature. This would drop the sample creature's BAB from +34 to +17, making the attack progression change to +27 Bite, +22 everything else, rather than +44 Bite and +36 everything else.
Anyone disagree?
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That seems reasonable to me. Since it would be undead rather than a dragon, it should use the general rules for the type.
However, I don't know if that would apply to all type dependant abilities (like skills). I could see that it would (at least in the case of a dragon).
So, I agree with your interpretation. Anyone else?