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I would never put my general on it, but I dont think I would have a problem using one in a 4k battle or higher. I usually like putting my general in a unit of BG, that way i got a Ld 10 unit that is really hard to break, plus my units near get a Ld bonus too.
The problem that I have with the dragon itself is this, its a huge flying projectile target. If you are going to field one, expect alot of shots coming at it, in the form of war machines mostly. For that reason alone in a 3k battle or less its too much of a possible-sinkholeness for me to use.
I share you opinion on the dragon though. Because elf characters aren't that good fighters of their own they really need to be in a unit. The one thing I'd put a character in would be a chariot and even then only nobles. A highborns Ld is too valuable to let him charge into the front.
If you want something to soak up damage, use hydras.
although if you really want a good looking dragon IMO I'd take the lizardmen cronosaur + balrog wings.
One decent alround combo would be: Crimson death + blood armour + crown of black iron + sea dragon cloak. Then after causing 3 wounds he would have 1+ save, 5+ ward plus he will always strike on S6.
That combo works very well on foot too.
ok im actually a high elf player and im just browsing dark elves but in 2k against dwarfs(many many many many cannons) I use 2 sun dragons weakist dragons available to a great effect