Thank you all so far for your comments, questions, challenges, and arguments. I know my presentation of this isn’t flawless, and am working out the flaws as you show them to me. It’s easy when you’ve grown up with your argument just to assume tenets that other people disagree with. So thanks for pointing the weak spots out. 🙂
What About Dragons in an Alternate Reality?
“If dragons are real, and I’m sure they at least were, they aren’t much like the dragons in fantasy, anymore than elves in LotR are like elves in Celtic myth. If one were to take the basic properties of a dog, for instance, and make it something fantastical but still call it a dog, it would be much the same, I think. Like and unlike the actual creature, in theory you could also change the nature of the creature. Fantasy is theory; thus, good dragons.”
Although this statement makes sense, I disagree. Fantasy is theory, yes, but that doesn’t mean we can twist what God has called good or bad. Alternate reality still has standards. God’s standards are absolute, because they come from His character. We are to be Holy as He is Holy. His character is unchanging, so His ethics are as well. If we create another world and seek to glorify God in that world and write in a way that pleases Him, we must stick to His standards.
The above justification of good dragons is similar to ones I’ve heard about when people read Harry Potter (for the record, I’ve never read Harry Potter, nor do I plan to). Mr. Phillips has a wonderful article on Mrs. Rowling’s books; I encourage you to read it all.
“What… is the fundamental argument employed by
honorable Christian thinkers… to endorse Harry Potter
and to justify the creation of children’s books which are
simply drenched in the glorification of sorcery? It is this:
fantasy worlds are not the real world. Authors need not follow
the same moral rules in fantasy realities. Things which are
downright wicked in the real world may be introduced in a
fantasy world and presented as good, if this literary device helps
to serve the broader purpose of telling a great story.” 
Later Mr. Phillips presents the question we should be asking in response to this argument. He asks, “Does the creation of ‘alternative fantasy realities’ allow authors to employ literary premises which declare ‘good’ that which God has declared morally reprehensible in the real world?” 
One could argue that dragons are not morals. This is true in one sense of the word. However, morals are also principles of right and wrong, not just doing right and wrong. Satan being bad is a principle. To call something the Bible presents as anti-God good is breaking a principle of right and wrong set out by God’s standard of His character. To say that we can call dragons good is saying that we know better than God does.
God’s authority is ultimate here. In defining right and wrong, we should never resort to questions such as, “did Lewis or Tolkien do it?” but “What does scripture say?” The issue is not whether great authors can tell a great story but whether they have done so lawfully.
There is one who tries to get us to break God’s law – Satan is lying in wait to eat the seed of the woman. Many men choose to be eaten, as “the eternal quest of rebellious man is to escape the law and dominion of God.” Man sins, detracting from God’s glory and adding to his own. He does this in literature by
“[creating] realities of his own where he is free to operate
without the constraint of the rule of law as prescribed by
God. The moral law of God and its application in the
universe reflect the eternal, transcendent, immutable
character of God Himself… Those who seek to create
alternative realities in which the moral law of God is
suspended, are, in fact, creating alternative realities
governed by someone other than the God of the Bible…” 
There’s nothing wrong with fantasy, per se. The problem is when our fantasy denies the law of God. Allegory, parable, types, and symbolism can be employed lawfully and to God’s glory. This is perfectly acceptable; Jesus even did it with the parables. “But the moment an author redefines the moral law order of the universe, he has… declared war on God. This is the case for fantasy realities in which murder, perversion, or witchcraft are presented as good things.” I would argue that the same is true for dragons. When people say that’s alright, they miss the point.
“The Bible offers no refuge to the individual who says,
‘It is okay for me to imagine and rejoice in the vanity of
immoral speculations, because I am not doing it in the
real world.’ If you imagine such things in your heart, you
stand condemned. (Matthew 5:27-28).” 
How does vain imagination show up when it comes to dragons? A vain imagination is one that seeks to imagine something that is at war with God’s reality. With dragons, this means that making dragons good is vanity. In A Landscape with Dragons, O’Brien explains how something good – symbols – have been twisted. “[Symbols] offered spiritual insight into the nature of the Christian cosmos, [impart] to the child some essential insights into the invisible realm and the struggle between it and the natural realm where we must live… it is now widely held that dragons are merely misguided, in need of compassion, and in some cases misjudged altogether. The monster is being tamed.” Instead of keeping dragons as the Bible portrays them, we create alternate realities where dragons are good creatures.
“A new worldview is being propagated, one that attempts
to convince the young that demons are friends or cuddly
pets and that people can use evil means to achieve “good”
ends… the growing confusion… draws modern man away
from traditional Christian spirituality and prepares him to
accept occult replacements.”
Although accepting dragons as good may not seem bad in and of itself, and while it does not affect your own salvation, it may have affect the salvation of following generations. If we become increasingly more syncretistic and allow more and more “occult” replacements in place of Truth, then it will drastically affect our children. A old – but very true – maxim says, “What parents allow in moderation, children allow in excess.” If we allow some syncretism, following generations will accept more and more of a pagan culture in their lives.
A second problem with alternate realities is when our reading of fantasy turns into escapism. I quote Anna Sophia and Elizabeth Botkin –
“We who feel “the urge to escape sometimes” should ask
ourselves why a world apart from God’s character, God’s
laws, and God’s created order would be a world a Christian
would desire to live in? What would make us want to run,
like Jonah, from God and His presence? ‘Escapism is only
medicine to one who views the reality of God and His creation
as a disease.’ [Ben Botkin] The answer for those in need of ‘escape’
from life’s hardships is running to God – not away from Him.
Here is the ultimate question for those of us who delight in being
titillated by unbiblical violence, unbiblical death, unbiblical spiritualism,
and unbiblical romance – even when it’s ‘just pretend’: Are we
are of the spirit, or still of the flesh? (Romans 8:5-9)” 
Some create fantasy worlds to get away from God’s ethics. Says Rushdoony, “Men who will not be governed by God’s word will not be governed by reality.” This is sin, because it sets the self up over God, saying that our reality is better than God’s.
If we truly believe scripture is sufficient, then we will allow it to change us.
If we truly believe scripture is sufficient, then God’s reality will be enough for us.
When it all boils down, the question is not the issue of dragons. It goes far, far deeper than that. It goes even deeper than alternate realities and creating new orders. It goes into spiritual warfare, of Satan, the dragon, attacking again with the age-old question, “did God really say?” He asks us if God really said dragons are bad. He is trying to get at us, our salvation… to make us syncretistic with his pagan culture. It’s part of the war between God and Satan, with us in the middle.
Every story is based off one basic story, whether the author admits it or not. The story is the war between good and evil. It is a true story, about a King who
“made a beautiful kingdom, and he filled it with
creatures whom he loved. A dragon crept out of the
darkness and sought to devour an entire world. A brave
man faced him, and the dragon slew the man. And the man
was God, but nobody knew that until the man came back to life.
Then he took the weapon with which the dragon had killed
him, and he battled the dragon. The dragon hated the Cross and
feared the way the man changed it into a thing that could defeat
him and his legions. God is the maker of this one great story,
which contains all the billions of lesser stories, and he will
decide who the tale ends. This story really happened, and parts
of it are still happening and some of the most terrific parts are
still to come. If you have the heart of a child, you will know
that this is true. And you know that a certain dragon has a
persistent desire to devour our children.”
Yet as O’Brien say so clearly later in his book, the dragon is set on us dismissing the account of the battle as nothing but a falsehood. “It is not to his benefit that we, imitating our Lord the King, should take up arms against him. He thinks it better that we do not consider him dangerous.”
 see footnote 5
 Doug Phillips, “Harry Potter and the Lavender Brigade,” 2005. http://www.visionforum.com/hottopics/newsletters/newsletter.aspx?id=07-22-05
 Michael D. O’Brien, A Landscape with Dragons. Ignatius, 1998. Pages 12-13
 Anna Sofia and Elizabeth Botkin, “How Twilight is Re-Vamping Romance.” http://visionarydaughters.com/2009/11/how-twilight-is-re-vamping-romance
 Quoted in the Botkin girls’ article.
 Michael D. O’Brien, A Landscape with Dragons. Ignatius, 1998. Pages 24-5
 ibid, page 32-33. Emphasis mine.