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So I have a small Space Wolves force (Stormclaw). I am wondering if Krom Dragongaze makes a good HQ unit. I don't really want go too deep into ANOTHER army, but a small one would be fun.

No not really, cut off his bolt pistol, swap it for a plasma pistol and he makes a great Ulrik the Slayer (who outside of ThunderLord's is our best HQ available)

I actually considered running him as a Lone Wolf of I got some TWC to make a ThunderLord.

An axe is pretty much always a bad choice when you HAVE to accept challenges. You're literally allowing the best opponent in the enemy squad punch your Warlord in the face for free. The alternative is Company of the Great Wolf and then multiple models MUST challenge, so you can choose who issues and accepts. That's the only way to mitigate that. So you use a Wolf Guard Battle Leader as the 'Chapter Champion', but there goes another HQ slot. Atleast Wolves aren't running low on HQ slots.

I would be tempted to change his axe for a Frost sword and make him a generic wolf lord. You can then give him all the cool upgrades to make him decent.

However, there have been recent Space Wolf leaks with pictures of new 13th company wulfen and potential new campaign box. I personally would hold off making any drastic changes to your Krom model for the time being until you see what they do with the Wolves over the next month or so. You never know, they might release an updated codex and make him an amazing named character.

Yeah, his Saga is kinda garbage. I hate any rule that requires you to challenge. He would be better off as just a vanilla Lord, which is another possibility. At least then I could end up with a better saga.

I will probably just run him as a Wolf Lord in Runic Armor with the Black Death frost axe.

I actually painted a conversion of Ragnar Blackmane which was based on the Krom model so it should be easy enough to change if need be. I hated the ancient Ragnar miniature.

Here it is:
http://www.dakkadakka.com/gallery/715732-Ragnar%20Blackmane.html

It's a cool looking model but not very competitive. If you're going to swing last might as well use a power fist or thunderhammer. The model should be easy to convert.

From the looks of it, Krom got a boost in the new Codex. He no longer has to accept and declare challenges, which is a bit of a plus. Saga of the Warrior Born no longer has that rider, it just gives rerolls in challenges. His Greatpack is a little lackluster, though. His price also went up by 15 points, I supposed to offset his no longer being dumb.

In terms of a fun and fluffy army, I like Krom and his Drakeslayers. It lends itself well to a more traditional Space Wolves feel without going over the top, but a lack of TWC Formations limits the actual use. It's cool and lends itself so well to the Stormclaw box and that big battleforce box from a while back, but it's unrealistic to say no TWC at all. Not when abuse of the system seems to be the name of the game now and it's up to players to downgrade their army to acceptable levels.