That anyone would believe themselves to be a dragon is, the more I think about it, hardly surprising. What is surprising is that anyone ever believes themselves to be human.
For what is this form but a transitionary one?; what are we all but beings caught between falling angel and rising ape, not a thing in our own right but full of the characteristics of both? (It seems no coincidence that human, in games, is usually the race with no particular outstanding traits. Because we are not an endpoint, a species in our own right, but a step on the road, not beginning or end but intermediate. Homo erectus and his ilk came closely before us. Spiritual evolutions will closely succeed us.)
Are we not all, as philosophers have said, spiritual wonders of unfathomable complexity living human lives? And in that spiritual realm which birthed us forth, in that spiritual realm towards which we gravitate invariably, are things not so curious and diverse that it would be quite ludicrous to say we are bound by our human forms; bound to this ape-evolved body alone with its particular instincts and quirks, rather than able to sample from and enter into the vast palette of wonders that is all of animal life and more? Are we not ludicrous to say that the forms of angels, gods and Buddhas are humanlike alone: that we will not someday perhaps be dragons, or unicorns, these mythic images that our consciousnesses seem to repeat?
They say dragon myths are based on dinosaurs. But why then, instinctively, do we still ascribe a certain set of characteristics to the dragon that we cannot to the lumbering land animal from which it was supposedly derived?: nobility, magic, power backed by keen insight and intelligence, a status of near-godliness in our mythologies. The "illusion" has been "revealed", yet we can't get away from the idea that dragons are special. How much more contrived the unicorn: just a horse with a horn, a clearly artificial amalgam, in truth perhaps a goat or broken-horned ibex glimpsed from a particular angle, perhaps a narwhal looking like a horse on the waves. A child could see through it. Yet though the trick has been exposed, that holds no power over us. Our hearts know that whatever inspired the unicorn is real, realer than the sad fiction of a broken-horned antelope.
How do we know? How do we know anything but that with which we are directly in contact? Maybe our hearts are telling us that we will be these powers someday; that we will walk with the grace of unicorns, fly with the wings of dragons. These Otherkin experiences seem like no past lives to me, but future visions; for she who imagines herself to be Cleopatra rarely wishes to be so again, but the one trait these experiences invariably have in common is a longing to transcend beyond the human. It is a looking forward, not a looking back.
In that vein, it would seem only sensible to me, from a spiritual perspective, to long to be dragon (or whatever else; and it would make sense of the fact that over the course of an Otherkin individual's life, there are often a lot of "whatever else"s identified with). It's hardly arrogance; it's a simple admission of the truth of all people, that we are at a point on a continuum whose endpoint will blossom out into something much greater, much vaster, than we can possibly imagine right now, but of which dragons are just a taste. --And when you think about it, that makes all the debating in Otherkin circles over who's a "real" dragon, fairy, etc. and who's not quite ridiculous. Would you deny any living creature its truth: that it is a life designed to transcend someday into magnificent, magical form? There are those who understand themselves poorly, and feel themselves poorly, and exhibit none of the characteristics of a magical being; but that does not mean they are not dragons. They are merely dragons, sleeping.
Even the cruellest of humanity will someday ride the skies of a grander world, majestic and lovely, unburdened by their previous pettiness. And they'll laugh at this idea now; and they'll laugh at it then, too, in a different way, but they cannot deny they dream of it. They cannot deny this magic is made for them, too.