I think my problem with the current Death Gaze is that it feels like an afterthought. The other two monster classes both have their racial (conversion) ability as the centerpiece of their strategies: Vampires are almost completely reliant on lifesteal (and are underpowered to the extent that their lifesteal is underpowered in certain situations); Half-dragons are usually counting on knockback damage to do the heavy lifting against higher level monsters. (And Knockback damage truly needs to be physical damage for Half-dragons. They're unplayable without a way to inflict physical damage, that's the way knockback is for every other class, and it doesn't even make sense otherwise - how is slamming a monster into a wall anything but physical damage?)
Gorgons, on the other hand, are primarily relying on their poison strike to get by. Not only is it a very powerful trait - possibly too powerful, isn't that the whole reason the Venom Sword was nerfed? - but Death Gaze itself is quite weak, rarely kicking in against weaker monsters and not adding a whole lot against more powerful monsters. Particularly since more conversions only increase the ratio, not its power - and increase it by such a small amount that often even two or three conversions won't make much difference in how many hits you need to kill something. A Half-dragon can rather easily get his knockback damage up to 300% of base, while a Gorgon is stuck at 100%; the Half-dragon even has an easier time setting up his own bonus attack in most circumstances.
Obviously instant-death Death Gaze would be nearly impossible to balance so that it was effective at both the low end and the high end of conversion points, but the current Death Gaze either needs to be buffed quite a bit inherently or there needs to be a way to buff it. Adding base damage or increasing the % damage of Death Gaze with each conversion would be one approach; I could even see some merit in having the Death Gaze ratio itself be fixed (probably at the same 50% that enemy Gorgons get) and having conversions only increase the damage it does, although that would require either starting it at a much lower level of damage or possibly even removing their poison strike (and then what would be the difference between Gorgons and Half-dragons?).
I'll also note that personally I think even 25% phys resist is too much for Gorgons, since between poison strike and ENDISWAL you can attack with however much resistance you want. Between that and the loss of their MP gain from kills, I would suggest removing Gorgons' phys resist altogether and instead reducing the cost of their starting ENDISWAL to 3 or 4 MP. Alternatively, reduce their phys resist to 15% but give them 15% mag resist as well.
I'd much prefer a solution that lets Vampires benefit from multiple deities. Dracul-only or forced atheism are both intensely boring designs; every single Vampire playthrough would be devoid of one of the most important and interesting choices that you can make in this game, and I suspect that nearly every Vampire playthrough would involve nearly identical strategies. Dracul in particular is a boring deity for Vampires (right now), since he can only provide two useful effects - increasing lifesteal and restoring HP - neither of which do anything to change the typical Vampire strategy.
I maintain that giving Vampires normal MP regeneration would be a nearly perfect solution, without making them overpowered or requiring any kind of scumming (except, perhaps, for BLUDTOPOWA, but that's more of a problem with BLUDTOPOWA - Wizards, Sorcerers, Warlords, Rogues, and even Paladins [now that GG won't punish them for using it] usually benefit from scumming for BLUDTOPOWA, and it would be much easier to simply find a way to minimize glyph scumming, like my third tier glyph shop suggestion posted elsewhere). HALPMEH would be great, except that Dracul hates it; so if you found both HALPMEH and Dracul, you'd have an interesting choice to make, one where neither option is obviously the right one. Moreover, pretty much every deity except for GG and Earthmother would become potentially useful for Vampires (and even those two would have some fun tricks for expert players).