Just an update to this thread - the dragon control does work but it's a bit limited. You can't fly around the whole map and burn everything in sight; instead you simply cycle through targets and order your dragon to attack. I was getting a lot of graphical pop-ups as well.
Here's a screenshot of my main character, Teekus the Argonian named after a character in Oblivion. He's currently level 36 and rips people's heads off with his bare hands. I think some of those 'finishing execution moves' in skyrim are brutally cool.
Large version http://www.arokhslair.net/temp/Teekus.jpg
Now, with Skyrim having such a large modding community wouldn't it be great to use this engine for a Drakan re-make? I know it will never happen but just think how good it will be with the wonderful graphics of Skyrim.