Agree on both counts.
"This party has the weapon I seek, so I will just leave now and not take it".... what?
To avoid the awkwardness the dragon rider should just leave after the flaming fist are killed, before the party goes down there. And not give you a chance to foolishly attack it.
The dragon could also be used to force the player to fight fair...for once. And not surprise haste murder everything on their path. But somehow the scene only has the most illogical outcomes imaginable.
