There is no reason to believe that “dragons” did not exist.
there are lots of extinct animals
I am not so sure about the breathing flames, but perhaps their breath was really bad.
Science never quite arrives at the truth about the natural world, but over time it tends to get closer to it.
The most cautious investigators of old bones who did not speculate about the critters breathing fire were likely not as popularly attended to as those that did. There was "junk science" in old times just as there is now.