Correct, the whole ops group has to be close to the white circle when the boss is pulled. That white circle does not deal you any damage, it is just a marking for where the boss fight takes place, so your melees can stand inside it without a problem.
Also, make sure that only the tank is standing in front of the boss so that your group does not get so much damage.
My guild was pleasantly surprised that the Dread debuff exists, because no longer can other players interfere in the fight or taunt the boss off our tank like it is possible in the Nightmare Pilgrim fight.
There does not seem to be a limit on group size, so you can easily engage the boss at one stack with 16 or even more players -- if you are willing to share the loot between 16 players, that is.
At one stack, the loot is always:
-one Dreadful Essence to increase the stack on the boss
-a chance for one or two Molecular Stabilizers OR one or two Synthetic Energy Matrices
-one random T4 campaign (MK-1) armor piece, earpiece, implant etc.
-one Dread Guard Mask
At two stacks, the loot is the same, except that you no longer get a Dreadful Essence.
We are looking forward to figuring out what to do with that Dread Guard Mask!