His damage, AC, and hp are really low for CR 16. That grapple strategy won't mitigate this- it'll actually make him weaker by lowering his AC even more. Draining temporary hp will boost his hp, but if he's spending every turn maintaining a grapple, he won't be doing much else and he'll still drop quickly.
I like it. But I'm a sucker for Lovecraftian horrors. A couple of thoughts:
I don't think the CON drain should have a save. It's basically the Chaugnar Faugn Avatar's primary attack. It's brutal but against a party of high level PCs it means the Avatar actually poses a serious threat.
Would it make more sense to measure the sacrifices to awaken the Avatar in HD not CON?
This might not fit the fiction Chaugnar Faugn was based on, but the Avatar really could use some more offensive SLAS especially since they can't fly and at this point the PCs almost certainly can. Or at least some way of dealing with that. Also the create pit line of spells are going to be a problem.
If the party knows what they're up against, they won't fall victim to the panic effect (or will likely have some way to mitigate it). If you have a paladin in the party, they might not fail their saves at all, and the paladin definitely won't be panicked. My current party has a paladin, so I'm always wary of adding big fear effects.
What does your party look like? That'd be good to know. There's no shame in designing a monster according to your party makeup, as long as it's not exploiting every single weakness. This is an Avatar of a Great Old One after all- one of many. Its nature is mutable.
His AC is effectively raised by 2 due to his unavoidable fear aura, but grappling will reduce his DEX by 4 and negate that bonus. The DR on similar creatures of this level is usually DR 10/something and something else (good and silver, good and cold iron, etc). His fast healing does help to balance it out a bit more.
Compare his con drain effect to a CR 16 Shemhazian's bite- that deals 2d4 points of STR damage, or 1d4 on a save. An astradaemon, also CR 16, drains levels and can suck out your soul when it grapples you. Both of these have greater HP than this thing, higher or equivalent AC and damage, and more spell-like abilities and special attacks.
In an actual battle, I can see this thing going a few ways. If it starts off close, it might be able to grapple one character and focus on draining them, but then it'll be subject to every other attack getting thrown at it. If it starts further off, it'll get shredded by ranged attackers before it has a chance to close and use its trunk to heal. If you've got any devoted blasters in your party, they may just Spell Penetration through its SR on a lucky roll and explode it from 500 feet away with a couple of fireballs.
Spells that seem thematic are mind control effects, horrid wilting to simulate "draining", and maybe a constant statue spell that lets it negate some damage in between turns.
and epic damage reduction reducing all hits by 5? (DR 10 seemed a bit much since none of them are going to have epic weapons at this point).
Didn't some rulebook establish that a weapon will penetrate DR/epic if its actual plus effective enhancement bonuses add up to +6 or more? (e.g. +5 flaming or +1 vorpal) Can't remember where I saw that.
EDIT: "effective" is the wrong word there... I mean bonus-equivalent, the bonus "price" of the properties.
Yeah with some offensive spells the encounter is more than just saving vs. Aura and then a damage race between his drain and the PCs.
Hold Monster, Unspeakable Presence, and Drain all pair well as horror goes. Imagine being panicked, paralyzed, and drained of blood all at once.
Horrid wilting is pretty powerful but as 1/day not that worrisome. It will outright kill a damaged PC but more than likely he'll open with it.
That curse is a 6th level effect, right? Or so my reverse engineering suggests. Since a bunch of spellcasters worshiping him can cast it it might be worth mentioning this somewhere.