To address the Dragon balancing.
First the player who has the Dragon takes a huge risk bringing him to the PvP - if he looses his Dragon (if it`s over level 8) it will be gone forever, and he will loose 120 Crown points. On top of that, if you managed to kill the Dragon you can loot it for 40 Crown points.
Second while the dragons are a threat, there are plenty of ways to counter them. Same way as you should use cavalry to counter archers, or pikeman to counter cavalry there are ways to counter Dragons - here`s some suggestion.
1) The best way to go about this - save up 20 crowns and buy a Dragon Slayer unit at the Market. Level him up to level 10 or so, upgrading his stamina and attack - and keep one with your main army. He has a Dragon horn ability that Freezes the Dragon, even in flight, and deals 10X damage to Dragons - usually 6-8 hits is good to bring down a Royal Dragon.
2) Archers and Crossbowman are rather good at bringing Dragons down - just keep them in a Loose formation to avoid most of his fireballs.
3) Halberdiers and other pike units get 5X attack bonus VS Dragons, if you have them in Loose formation they`ll take little damage from the Dragon fireball. 5 battalions of these units will take the Dragon down as well.
4) With your concern about Dragon constantly running back and using Fireballs - the Dragon will run out of Stamina pretty fast. So use loose formation to speed up your units and keep on chasing them, eventually you`ll get it.
6) Use Foot Knights or other healer units, to heal any damage you get from Dragon fireballs to your units.
7) If you visit Elven town - purchase some Male or Female warden units, they have a Downpour spell that eliminates all fires and fire damage in a large area.
And sounds like you are relatively new to the game - I would recommend testing your Dragon strategy in the Sssilistra region - just move your army there and enter View mode (magnifying glass icon)