Dwarves!
Get like 70 of those and you'll be unbeatable. They can be recruited for free from external dwellings, and since they're one of the weakest tier 2 units, they'll get ignored by the AI until everyone else in your army is dead. My town was attacked and I was totally unprepared, and the coward fled because they couldn't handle my dwarves.
But for a more serious reply, I think dragons win. HoMM II is what got me into dragons in the first place, and I still nerd out over those majestic creatures to this day. HoMM II's dragon designs will always be my favorite out of all games, not just limited to the franchise.
Other favs include: Bone Dragons - really cool-looking, I love their evil grin and glowing eyes; Vampire Lords because they give you a huge advantage, Ghosts because once you get even 20 of those, you win; Titans for being overpowered yet hard to acquire; Phoenixes because they're pretty (shame they don't get resurrected), and Wolves because they're cute. No HoMM game since has had such cute wolves.