That sounds plausible. I suspect Talana's body was there (there is uncertainty, with that explanation in mind, but I think it was) but I don't think Talana's spirit ever was. Or if she was, it really was her dying moments and just enough for The Other One to take advantage of the situation and get a nice angle on her manipulation of your character, as you say. Indeed the whole thing may have been engineered by her right from the time you were at Farglow and the dragon was spotted in Broken Valley, knowing that Rhode was reckless enough to embark on the mission with a half-trained, unready dragon slayer in her stead, which is exactly what she needed. Did the dragon ever exist? Was its presence coerced or forced by The Other? We certainly now she's very powerful so either possibility is, well, a possibility.

J'aime le fromage.