All you said is correct but it doesnt say that they wern't bound to him.. well not exactly, first I agreed but M3 reveales some new stuff... (i've copied my post a dream of release, didnt realize you started a new thread).
At M1 we know as mentioned that the confinment dream was used on the watcher's arm to seal it, BTW I suspect the arm itself wasn't freed when Balor released him... but i'll leave that for now.
This proves us that CONNACHT did have the confinment dream, ok it was used to trap the watcher's arm, but it can also be used for loyality and this is why:
In M3 we learn that the oghres are bound to the trows by the confinment dream, this ensures their loyality. (from oghres flavor). Connacht probably learned that spell from the trows. Also in M3, Moagim Reborn has somehow got the trow on his side, the generals of the Llancarfen army knew that the key to break Moagim's army is to somehow destroy his alliance with the trow. The plan that was concieved by myrdred was as following: have the oghres to rebel against the trow, this will make sure they have more important buisness to attend to rather then fighting with the light.
To have the oghres releaesd from their confinment dream, myrdred somehow learned of the dream of release. I dont know how he learned it, but it's obvious he can cast it, i'm just now at a level in which you control myrdred and use him to cast release dream on oghres to make them fight the trow.
This is how he might have broken off from Balor's confinment dream. dont get me wrong, I dont think he taught the other fallen that spell, but maybe they shared it when they were still light. Well now you could say why would Balor cast confinment on them if he knows they can cast release? anyway i think i've proved why connacht/balor has the confinment dream, and it also can be used for loyality.
