The Invert Y-axis option doesn't seem to affect the dragon controls. Ever since I played a lot of F/A-18 Interceptor on Amiga, playing without inverted Y has been a total pain since I always turn the camera in the wrong direction.
Dragon works fine for me with Invert Y. I'm the same way, gotta have invert.
Try playing around with the setting like disable invert then exit the game, or start a game without the checkbox selected and see what happens.
