1. Nobody yet knows the answer. It was discussed a lot in Div2;ED section and on our russian forums (ag.ru) bur so far no solid theory has place.
That is sad and game-story never explain this moment either. =\
Btw, the The Ouroboros was the last real Dragon Knight (he obtained the power from the dragons himself). Note how BIG he was. Almost like a Dragon.
No, he was the Dragon Knight. He ruled the Fjords once, landlord of sumtin. Meh, read the Dragon Knight History.
That is very strange, because in Lovis tower, before you meet Lovis, you need to answer the questions and one of questions about Dragon god and correct answer is - "Ouroboros, god of Dragons".
Also, if you read mind of Artemas, you will hear "Smile upon me favourably Ouroboros, god of Dragons, and upon Orobas, my kind master, now and in the afterlife".