Audience-Alienating Premise: This is a very dark film with blood, murder, scary dragons, arguments over religion, partial nudity, as well as the blatant misogyny of women being sacrificed to dragons (showing viewers the messy results). It's also a "PG-rated film by Disney". Audiences looking for the former will be alienated by the latter, and vice versa.
Misaimed Fandom: Skeptics and atheists like using Tyrian's "They never do tests" speech, which out of context does make him sound like a noble rational soul crusading against superstition. Even some Christians are convinced that the movie is anti-theist despite it being a major studio film aimed at mainstream audiences. One thing that doesn't help those claims is when Galen kills Tyrian with an enchanted spear, thus preventing him from living to see Ulrich's return.
Narm: Hodge. In a perfectly ordinary, conversational voice:
Hodge: Do you know? Someone shot me. But I can still talk. There's something that needs to be done!
Galen: The dragon...
Hodge: NO! No, not the dragon! The master's ashes! Here! Burning water! Find the lake! Throw it in!
King Casiodorus. The thing is, the lottery worked. Casiodorus tells the story of how his brother Gaiseric, a brave warrior king, went out to try and slay the dragon. Vermithrax killed Gaiseric and all his men, then laid waste to whole towns in retaliation. The point is underscored when Galen's first bungled effort at dragonslaying provokes a slaughter. Casiodorus's solution of pacifying the dragon with a handful of sacrifices was far better. Even though Casiodorus is later shown to be a hypocrite who accepts bribes to keep rich ladies out of the lottery, and then jettisons the whole scheme when his own daughter offers herself up, no one ever presents a compelling answer to his argument: Better a few should die that many may live.
However, Casiodorus doesn't have one vital piece of information: the dragon has just had babies. A few virgins a year to one dragon until it dies of old age might be a logical (if heartless) trade-off, but with three more dragons, and the possibility of more dragons in the future, it appears that Galen is in the right in trying to kill the dragon and its young now.
Tyrian's "They never do tests" speech makes him sound like a jerk, but as Valerian just got done saying, all the other true wizards are dead. Tyrian's probably encountered a few charlatans in his day, so his skepticism about Ulrich is actually pretty justified. Though the legitimacy of Tyrian's skepticism falls flat when one remembers that Tyrian acknowledges the existence of Vermithrax while knowing that dragons are supernatural creatures. He also knew that Galen used magic to cause the landslide that buried Vermithrax's cave, but doesn't change his view on magic or wizards accordingly afterwards. Alternatively it might just make him more suspicious of an alleged wizard being so cagey about providing evidence, since he knows real magic is easily proven.
He obviously knew dragons exist, given his life in Urland. That didn't prove real magic does too (recall that If Jesus, Then Aliens is a fallacy) especially if he'd only encountered charlatans.
Tear Jerker: Despite being a monstrous killing machine, one can't help but feel sorry for Vermithrax when she finds her hatchlings dead. This goes into Nightmare Fuel mode when she goes into a murderous rampage.
Visual Effects of Awesome: Vermithrax used a new "Go Motion" stop-motion technique, which added a blur to the animation that removed the jerky aspect most stop animation had til then. Most of the scenes with the dragon hold up incredibly well, even more than 30 years later.
What Do You Mean, It's Not for Kids?: One of the reasons the movie bombed in theaters was that people were expecting a kids-friendly Disney movie... only to find out there was blood, murder, scary dragons, a ton of Squick, and partial nudity. Even with a PG rating at the time. The ratings system didn't have a PG-13 movie yet in place (this was one of the many films that pushed its creation) and it wasn't mature enough to qualify for the R rating.
Complete Monster: Ackdam, the Demon Lord, is a powerful Evil Sorcerer who invades the kingdom of Faaren, massacring everyone in his path, wiping out the capital city and personally killing the king. Ackdam proceeds to set up a horrific regime where citizens are starved, enslaved and killed at the will of the king and his minions, opposed only by a small rebellion and the renegade prince Sirius. When Sirius rescues a village from Ackdam's minions, Ackdam reacts by sending his chief minion Zagi, in dragon form, to wipe out the village to the last man and attempts to capture Sirius to execute him with his captive mother the Queen, wishing to rule Faaren no matter how many people have to die.
Porting Disaster: The Game Boy version: Take a multi-hour game that takes longer than 4 AA batteries will last, leave out any kind of save system, and slow down player movement. Et voila! A game that is Unwinnable by (unintentional) Design without the Game Boy wall socket adapter.