This one is pretty easy. The Flame Shield uses any form of combo points you have active, whether they're on your target or on yourself. You still need to target the appropriate target (them or yourself) to use them, but either will work. The only time you need to use this is when the Blue Drake is using the ability Arcane Surge. It hits for a crapload.
Again, additional combo points only extend the duration of this buff, not make it stronger or anything like that. While using a 5-point Flame Shield is ideal so you can absorb the entire surge, it's not necessary. A one or two point Flame Shield will save you from death, and your healing will let you recover. If you don't use the shield at all, you will probably die. Again: 5-points will reduce the whole Surge, a couple of points will absorb enough to let you survive.
If you're a raider, spend a little time practicing that, too. It's one of the key parts of the Malygos fight.
Q: Wow, that all sounds really complicated! Is it hard?
A: Nope, not really. It's pretty easy! I went into more detail than I needed to because it's an integral part of a raid encounter. It takes these mechanics and makes them a little more extreme and demanding. The quest itself is really easy once you get the hang of it.
Q: Help! Help! My combo points aren't showing up, what's up with that!?
A: You're probably using a unit frame mod. Vehicle combo points aren't integrated into most of those yet, since it's such an uncommon thing. The easiest fix is to count your combo points in your head. 1... 2... 3... Engulf! 1... 2... 3... Engulf! The more complicated fix is going to vary from mod to mod, if you want to keep your custom unit frames. It will either take an update of that specific mod, or some lua editing on your end. Look up your mod on Curse or wherever you got it, then see if there's any information on that there.
Q: So the Malygos fight is exactly like this? That sounds really easy.
A: Only the last phase of the fight. There are a total of three. The third phase is really easy if your raid has been practicing this daily quest, though. In the raid itself, you'll only have to worry about damage or healing if your group has been set up properly. Everyone will need to worry about the Flame Shield, though.
Note that the strategy here was written somewhat with that encounter in mind. Doing one role at a time, and learning each one. You can win by not putting up the DoT at all and just healing yourself and spamming Flame Spike, but it's probably not a good way to teach yourself to do it.
Q: Okay, that's cool. But what are the rewards?
A: At level 80, the Aces High! daily quest rewards you with 13 gold, 23 silver, and 250 Wyrmrest Accord reputation. That's 275 for us Humans. High five!
Arthas awaits and so do your questions. Find the answers you've been looking for that will help you with your journey into Northrend and to level 80 with Wrath 101.