Yes, I meant MLP fiction primarily, but I suppose anything with good characters I can cross-reference from several sources should work.
Back to dragons... well it could simply be a natural part of their lifecycle. Dragons are essentially bipeds in this 'verse, so maybe at some point they actually were a dominant species, explaining some of the tool designs. Ponies probably lived alongside them, in a sort of peaceful coexistence. Then, something happened. Probably Discord. Over the course of a few days/years, dragons are nearly extinct as a species, being eliminated first as the only beings powerful and numerous enough to actually pose a threat to his rule. Cue Celestia (probably not named such back then) and the Elements of Harmony, a last-ditch effort to defeat Discord, which works but leaves the lands devastated, the planet losing its natural rotation, and of the dragons only a few remain, hiding in their caves around the world. Celestia and Luna, the most powerful of ponies remaining, assume their identities and start trying to rebuild the world, at the same time beginning to search for ways to restore the dragon population. Eventually, a full-on repopulation effort proves impossible, the remaining dragons growing territorial and protective of their solitude, and new offspring vanishingly rare. Sometime after the conflict with Luna/Nightmare Moon, Celestia renews her efforts, and creates a magic spell that, while incredibly difficult and exhausting, allows her to facilitate the creation of dragon eggs, which could then be hatched by any pony of sufficient magical talent. The resulting new species, magical dragons, do not grow into the massive flyers like their old ancestors, but instead possess special magic powers, such as directed sending and receiving of messages, essentially turning them into a quasi-subservient race, which is nevertheless treated with proper respect by all ponykind, in long-forgotten memory of their sacrifice that allowed the world to still exist today.
How's that?
And yes, it sort of grew in the telling.