I'd probably agree with thomas.berubeg, but I don't think there is technically anything saying "intelligent nukes" couldn't reproduce.
The Dragons were all locked away in some sort of storage dimension for at the end of the Godswar. I had assumed that this was a provision in the Compact, but Kael has stated that gods were not forbidden from "waking up their pets" (Mulcarn was not breaking the compact by waking Drifa or Fiacra, but of course he did break it by entering and conquering Erebus). It is most likely that they were simply not suited for the subtler types of conflict that the Compact still allowed, and so were no longer considered useful. From time to time a dragon escaped back into creation (perhaps released, perhaps escaped...or maybe not all the god had bothered to lock them up in the first place), but most of these were slain by heroes of the Age of Magic.
It is known that Acheron was able to use the passion and hatred of a group of barbarian orks to create for himself a passage back to Erebus. It is also known that Acheron had always been a rebellious beast, who bit the hand of his maker (Bhall) as soon as he was created. I believe this means he was made to be a weapon of good against the evils of Mulcarn, but that he chose to fall long before his mistress did. Since Bhall was one of the most active goddesses, I expect she may have made many other red dragons too.
Abashi was Ceridwen's dragon, who was awakened in the Age of rebirth though Sheaim Rituals. Tebyrn released her, and inscribed a rune on her head that would resurrect him whenever he was killed, until the rune was dispelled--which would require slaying the great dragon.
Eurabatres was Amathaon's Dragon (I'd guess his only one, as his creator was the gentlest of the gods), who is the strongest being ever created (except by The One). That means he is greater even than any archangel, even Cernunnos, and he possessed the immense genius of his maker. His consciousness found an escape from the storage dimension, and wandered creation looking for a perfect host, free of the taint of Agares. Once it finally found a pure and ingenious host, it merged with the orphan Cardith, and began a long sequence of events and rituals that would culminate with the recreation of its physical form.
My personal opinion is that Dragons are really a type of angel, just in a monstrous rather than humanoid form. Some gods made several, some made none, but only the strongest have survived. Since the retconning of FfH history a couple of versions ago,all angels (excluding the 21 gods who were made by The One) were created as weapons in the Godswar. I also like to think that Angels and Dragons are not made of crude matter/mana like Creation itself, but are the children of the gods, made of their own soul and thus possessing the Divine Spark just like the Children of Nemed.
It is not uncommon in Erebus for an angel/demon to mate with a mortal and produce offspring (although I don't think there are any examples of them mating with each other), so it is possible that a dragon could as well. Of course, the shear size difference could make mating technically difficult.
I think it is safe to say that no unit in FfH is the descendant of a dragon. Originally, Lizardmen, Orks, Goblins, Ogres, etc., were all supposed to be descendant of the same gren skinned race, who were by nature very chaotic and prone to change. This was however changed, after I pointed out that some entries implied that the Orks were actually the Bannor who were corrupted and mutilated by the Fall of their goddess. After this retcon, the various Clan/barbarian races were separate races who had all been close to Bhall. Who knows, Lizardmen might be all that is left of the Aifons.
(As a side note, I'll say that in my version Dragons are Nukes. They don't self destruct, but they can attack at range and when they do so the whole world shakes under their might. The side effects of this is that they cause other nations to hate you for unleashing such a force upon creation, and they cannot be built until the proper ritual (the equivalent of the Manhatten Project project) is completed by someone. I actually find the need for a ritual (requiring Cult of the Dragon in the city) to be particularly appropriate. The Kuriotates and Sheaim may really want to wipe the other out early though, since the ritual letting their Dragon back into creation will allow the other in as well. The Dragons themselves will be much stronger, and very cheap.
Unfortunately, I didn't get that much done over the break, and am back in school now. If 0.33 hadn't come out I probably would have forced myself to work on it more, but I started playing Somnium instead. I'm not sure when my modmod will get released. If I don't have too much work this first week I'll try to get a 0.32 version out soon, but otherwise it may be a while and would be based on a future 0.33(+?) xienwolf modcomp release.)