[@Mister Thirteen] Folklore on dragons is highly divided. Most fairy tales that involve dragons, believe them to be one with the elements. In the same tales, dragons are believe to be able to communicate by thoughts rather than words. While other tales, depict them to be bloody creatures with a blood lust that is only matched by their desire for wealth. 
So, it all depends on what of these stories you want to believe in. 
We could do something else. A different view. I've seen a similar idea somewhere but this one will be a little different. 

What if we say that all baby dragons are humanoid in nature (think Lizard man) and when they come of age (the first arc), they are imbued with the magic to turn into full dragons. How would that sound to you?