I think Ghetsis being "nerfed" in terms of difficulty and using a physical Hydreigon is likely intentional in that it's meant to showcase that Ghetsis at this point is just batshit insane. The guy is so utterly messed up in the head at this point that he literally is almost completely incapable of rational thought and is just commanding his mons wildly with the wackiest movesets, and his Hydreigon being physical, holding a Life Orb (doing more damage and hurting itself in doing so), and running Frustration is showing how Ghetsis at this point straight up has lost all sense of reasoning and at the point that he battles you, he's completely snapped now that he failed to freeze you alive and you defeated his Kyurem abomination. His Hydreigon straight up either detests him or is terrified and Ghetsis is commanding it relentlessly without any sense of rationale. He's acting completely on pure, uncontrolled rage. His Hydreigon's moveset and running Life Orb is reflective of the sheer rage Ghetsis has flown into at this point.
His BW2 battle theme, combined with his sprite animating him slamming down his cane while panting heavily, is very very reflective of how utterly deranged and psychotic Ghetsis is at this point. The whole battle isn't really supposed to be difficult for an in universe reason: you're basically battling a guy who is completely batshit insane and has flown into an uncontrollable rage because his plan is on the verge of being foiled by another "random kid" yet again after Hilbert or Hilda already stopped him two years ago, and now he's totally lost it and has gone off the deep end.
In BW1 he's harder because while he's evil to the core, he's also still acting on rational thought and his Pokemon are carefully used and planned out, and he's still acting relatively calmly. After all, his plan to conquer the world was based on elaborate lying and manipulation of the masses through propaganda. But in BW2 his sanity has almost completely degraded and his battle is reflective of that. It's evident afterwards in that Ghetsis snaps so hard after losing to you that the Shadow Triad is forced to put him down permanently, to the point where they mention in the post game that he can't do anything anymore (whatever this is supposed to mean, this is entirely up to interpretation).
I can understand the perspective that he wasn't really needed in the story to begin with, just really wanted to point out an important aspect of BW2 Ghetsis which I feel his battle is supposed to represent: his utter insanity and how he's trying to win a second time but has basically reached the point where he is totally deranged and psychotic, unlike in BW1 where he was simply evil but still "sane" in a sense. BW2 represents Ghetsis's sanity almost completely degrading and his desperation to conquer the world and succeed, but no longer relying on manipulation and lying like in BW1 (where is is both sane and in fact quite intelligent), but rather sheer brute force to get what he wants no matter what it takes, no matter who he has to destroy, to do it, and by the time you battle him and foil his plans to use Kyurem he's just completely lost it and just lashes out uncontrollably. He's "nerfed" in that his BW1 battle was hard because he's rational and acting intelligently in his battle against you, but in BW2 he's not acting rationally at all.