I imagine I'm doing something wrong...
Mostly what you're seeing is just the scaling change as you level. Healers tend to get weaker from ~83 to 90, then get better with gear. It kinda sucks. You'll have to learn to be efficient with your heals and best match the incoming damage. There are good guides by Ashleycakes and Elethia on the priest forums and howtopriest.com for both specs.
Bottom line, it happens to every healer. After a while you get used to it, and once you hit 90 and get better gear it will become a bit better (although you'll never see anything like you did at the 80 and below instances).
Both holy and disc are fine for dungeons. Personally, I've gotten to the point I prefer disc just because I can do extra damage (smite, penance, and holy fire) while still healing people with atonement.
However, holy still works well. Just make sure you're in the the serenity (single target healing), keep renew on the tank, and use holy word: serenity and possibly heal during low damage phases. Switch to greater heal when the damage increases. Don't forget prayer of mending is great if other players are taking some random damage.
P.S. Don't worry about enchanting gear. I would never enchant gear until I had at least 458 gear at 90.
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