The behavior of fire is a feature. Otherwise, the story goes, the unit would fly right up to the enemies, and get hit with melee weapons, which is not usually what you want. I find the current situation fairly satisfactory. Move the dragon toward the front, so he doesn't have so far to go to get into range. It's not like anyone is going to be able to hurt him in the first few turns
You can use "attack one turn" to get your unit to fly, but I find that this normally gets him right into melee and reduces his ability to use his breath weapon.
Re: Flight.
Hybrid Mode
