Dragons were dinosaurs (Talk.Origins)
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The simple fact is that such legends would be a natural result of real encounters with dinosaurs. Many of these legends are part of the local history of the area where a given legend is found. (Talk.Origins quotes in blue)
1. Folklore does not require a physical basis. Leprechauns, the Loch Ness Monster, djinni, the tooth fairy, and other creatures have long survived in folklore without any bodies to examine.
When one looks at the standard picture of a dragon, it turns out to be an amalgam of various kinds of dinosaurs. It has the general body shape of a sauropod like diplodocus, the wings and tail of a pterodactyl, the teeth of a Tyrannosaurus rex, the claws of a raptor, and the plates of a Stegosaurus. This is what one would expect if people had seen the animals we call dinosaurs, and over time the numerous verbal descriptions got mixed together to form a combined description from several different kinds of animals.
In addition, dragon legends are not restricted to any particular culture. Nearly every culture has dragon legends. If nearly every culture had leprechaun legends, for example, Talk.Origins would have a point. But the fact that nearly every culture has dragon legends indicates that there is some basis in fact. In addition, most reports of dinosaurs are not fantastic accounts, but instead fairly standard reporting of facts.
2. Men never met up with living dinosaurs.
This is based purely on the evolutionary theoretical system and as such this response amounts to "your theory does not work under my theory, so your theory must be wrong."
3. Dinosaurs need not be living to inspire myth and legend. In China, fossil bones (of all kinds of creatures, not just dinosaurs) have long been called dragon bones.
This does not mean that the bones inspired the legends; it could mean only that people finding these bones drew their conclusion from the legends.
Fossils of Protoceratops inspired legends of griffins [Mayor 2000]. In Lakota myth, dinosaur fossils in the Badlands of South Dakota are attributed to river monsters [Erdoes and Ortiz 1984, 220-222].
These theories are based on the assumption that neither set of legends is based on real animals.
For example, griffins could have been real living Protoceratops and the reference to wings could have resulted from a mix-up with pterodactyls or some soft tissue structures that were taken for wings.
The bones attributed to river monsters in Lakota myth may actually have been the bones of recently living sauropods. At the very least the legend would have inspired the interpretation of the bones rather than the other way around.
It is only the evolutionary theoretical system that leads to the assumption that these can't be based on living dinosaurs.
The Pawnee attribute fossils to a former race of giants [Grinnell 1961, 355-356].
Once again, there is no evidence that the fossils were not interpreted based on the legends, rather than the other way around.