If it helps, here's the upgrade scheme I have planned out.

Firstly, the dragon is way OP. Even at our current, unmodified power levels, we can't take him on. The dragons were created to fight off whole armies of demigods, and as such can only be slain with godlike power. So we don't need to worry about how strong we are at first, because nobody is strong enough. We'll acquire that strength through certain items, and we'll need all of them to even have a chance against the dragon. These items are scattered throughout the continent, giving us the impetus we need to explore the world of Aion.

I haven't decided on all the dragonslayer equipment yet, but there are a few that our characters would probably know about through myths and legends.
[list]
[*]Dawnblade: A mythical longsword whose edge is infinitely thin, unbreakable, and cuts through every substance in the world like butter. The blade shimmers with a golden hue that makes it impossible to miss. According to its User Manual, the weapon assigns ownership to the first person who grabs the hilt, and shuts down anyone else who tries to take it. Its last owner was its creator, and only its creator can reset ownership.
[*]Duskblade: The sister weapon to the Dawnblade, likewise unbreakable. This longsword inflicts un-healable wounds, and any living thing cut by its blade is cursed to die. Its combat properties are otherwise equivalent to any other high-quality sword. Since the weapon possesses no unique visual features, it has been lost to time.
[*]Aegis: A large, unbreakable shield that reflects anything that strikes it. There is a trigger on the handlegrip that activates a spherical protection field in a 1-meter radius (though doing so negates the shield's reflective power).
[*]Titan: A necklace with an ancient medallion that, when grabbed, materializes a suit of powered armor over the wearer from head to toe. The armor vastly enhances the wearer's strength, speed, and dexterity to near godlike levels, and possesses a mysterious protective field able to stop nearly anything this world can throw at it. [i]The ancients considered this their weakest armor.[/i]
[*]Luna: A silver bow that fires magical light-arrows. The arrows are not affected by wind or gravity, and thus fly straight and true. Up to three may be fired at once. Each arrow possesses enough piercing power to rip through multiple armored targets.
[*]Magic Gauntlets: A pair of gauntlets that tap into the user's bloodstream, allowing even non-mages to cast magic. They can draw from ambient mana in much the same way people naturally do, which allows the user tremendous freedom to cast whatever spells they want at minimal cost to themselves.
[/list]