The fiber product can be reducible
Yes, $X \times_Y Z \to Z$ will always be an isomorphism over an open set $W \subset Z$. However it's possible for $X \times_Y Z$ to be reducible.
Example
Let $k$ be a field and let $Y = \mathbb{A}_k^3$; let $X = \mathrm{Bl}_p Y$ where $p \in Y$ is a closed point (e.g. the origin), and let $f: X \to Y$ be the projection. Let $E \subset X$ be the exceptional divisor (it's a copy of $\mathbb{P}^2$ over $p$), and let $\iota: E \to X$ be the inclusion. Take $Z = X$ and $f=g$ -- then $g$ is certainly dominant since it's also birational.
In this situation the fiber product $X \times_Y X$ has 2 components: one is the image of the diagonal $X \xrightarrow{\Delta} X \times_Y X$ over $Y$ (so just a copy of $X$). The other component is the image of the map
$$
E \times_{\mathrm{Spec} k(p)} E \xrightarrow{\iota \times \iota} X \times_Y X
$$
In particular, this component is 4 dimensional, whereas the other is 3 dimensional (being birational to $\mathbb{A}^3$)! Since $X \times_Y X$ isn't even equidimensional, it can't be irreducible.
Requiring $Z$ to be flat might ensure the fiber product is integral.
I think if we assume in addition that $g: Z \to Y$ is a flat morphism, we can guarantee that $X \times_Y Z$ is integral, but I'm having a hard time finding a reference for this.
Note that flat implies dominant, since flat morphisms are open. Also note that flatness would rule out the example above ($f: X \to Y$ was not flat, for instance because its fiber dimension was not constant).