"The trouble with the agnostic argument is that it can be applied to anything. There is an infinite number of hypothetical beliefs we could hold which we can't positively disprove. On the whole, people don't believe in most of them, such as fairies, unicorns, dragons, Father Christmas, and so on. But on the whole they do believe in a creator God, together with whatever particular baggage goes with the religion of their parents."
His analogy was clearly to imaginary or "unprovable" things outside of proof, as being equally unprovable. This is why he instanced elves, unicorns, and dragons (as being mythological creatures) and thus equally capable of an agnostic indifference as to their existence...and equally as invulnerable as somebodies idea of "God" to being disproven.
Elves, unicorns, and dragons are generally represented as having physical tangible forms that might leave evidence. But if you want to suppose either a wholly supernatural and non-physical elf, dragon or unicorn, or such a creature that physically exists but has strong supernatural powers that it can and does use to hide the evidence of its existence then in a sense I am agnostic about them. I lean towards skepticism but I'm not prepared to flat out say that no fantastic supernatural creature along the lines of elves, dragons, or unicorns exists. This is esp. true given the flexibility in the definition of these things (as you have shown about dragons), and the vastness of the universe. My viewpoint about these things might be similar to Karen's about God. I don't believe that something like Smaug the dragon from The Hobbit exists on Earth (like Karen doesn't believe in "the father God", but I'm agnostic about supernatural fantastic creatures of some type existing somewhere (like Karen is agnostic about some divine creator).
Tim |