I just need a clarification on this- when shooting at Dengar (in his arc) with another ship than Biggs (while in range 1 of Biggs) can Dengar return fire on the shooting ship or is he bound to fire at Biggs?

He shoots at the attacker because Biggs is not a legal target for the attack because of dengar's wording

Yes he can. He has no ability to target Biggs in this situation, so his shot goes ahead as normal.

It's only when the shot COULD target Biggs, that it has to if he's at range 1 of the intended target. Dengar's only choice of target here is the guy attacking him.

Cheers!