If I'm not mistaken, he's got 100% immunity, so it's not even possible without cheating.

In the SNES version it's quite simple. There's a level 6 wizard spell which always kills the first 3 monsters, even invincible Megadragons. ;-)

In the PC version it's far more difficult.

But possible... ?

I've seen a video where it was done on the PC version (doesn't look like fake but I don't know) . High character level seems to increase the chance to overcome its magic resistance.

It is possible in the PC version, I've done it, and it has nothing to do with level. The Implosion spell (and Phasors, which cast Implosion) can damage him. Nothing else will, not even with maxed out stats and levels

The hard part is keeping at least one person alive long enough to kill him. It takes a LONG time. And it's not worth it. You don't really get anything special, and since he has plot armor he just reappears as soon as you step off his square.

Mass Distortion should also work, and will outdamage Implosion unless the Mega Dragon's HP is already low. Doing this greatly speeds up the fight.

Or, cast Frenzy, then follow up with Finger of Death or Disintegrate; this will kill the dragon instantly, due to what I consider to be a bug (but which is also present in the Sega Genesis version). The (European) SNES version is badly broken. Aside from this spell always working, the game has many other bugs, including, it appears, one that can prevent you from leaving the inn, ruining your save. There's also the fact that so many spells do 50 damage when resisted, even if the spell would have done less damage if not resisted, and enemy frenzy being broken, making your party invincible.

If you're looking for a version to play, avoid the SNES version; it's broken to the point where it's not worth it. I've heard they were going to bring it to the US, but didn't for an unknown reason; my theory is that they could not get the game to pass Nintendo of America's quality assurance.

(Note that there's a different version released in Japan for the Super Famicom; this appears to be a completely different game mechanically, and I don't actually know if that version even has a mega dragon in the first place. It's not the only WRPG to receive such a drastic remix in Japan; we also see this for Ultima 4, Bard's Tale 1 and 2, and Dragon Wars.)

Aside from Implosion and Mass Distortion, I would expect any other spell that does non-elemental damage to be capable of doing damage (without Frenzy). This would include:
Energy Blast (scales!)
Disrupt (but not from the front row; actually don't remember if you can cast it in this situation)
Sand Storm
Disintegration (expect only 50 damage, not instant death; this is that 6th level spell mentioned earlier)
Dancing Sword (scales!)
Meteor Shower
Star Burst
Pain (I think)
Deadly Swarm
Moon Ray (also heals the party, but won't come close to outhealing the dragon's breath)

Chances are that the only spells worth considering are:
Mass Distortion (best spell to use early in the fight by far)
Implosion
Dancing Sword (will out-damage Implosion if your level is high enough, but may deplete your SP too quickly)

Edit: For the PC version, as a result of the RNG governing damage rolls being biased, or perhaps the damage ranges in the manual not being accurate on the low end, Energy blast will actually average 4 damage per level on a failed save or 2/level on a successful save (which you should assume is the case for enemies like the Mega Dragon). This results in that spell outdamaging Implosion at high levels (251+), and there's at least one item that can cast that spell (avoiding the scaling cost), so that spell is technically worth considering. Note that other scaling spells tend to do more damage on average than the description would suggest. For non-PC versions, I do not know, but this should be easy to test if you have a high level sorcerer (or cleric, if you're testing Power Cure, but a Max HP potion might help here).

This is pretty well described fight and everything about Megadragon: https://lparchive.org/Might-and-Magic-II/Update%2047/

(by the way I love the whole series, very much recommended)