Being mythical, you could have them do whatever you want. Chinese dragons could happily hover in the sky. The dragons in Lair are, as the developers keep reiterating, very physical. They're big, fat monsters. They're heavy. If they want them to hover, they should have them flapping their wings to create some sort of lift. It doesn't need to be scientifically plausible, but it has to combat the notion that they are heavy lumps. In the clips, the dragon's slow to hardly any forward momentum, yet hold they're wings out like birds. No flying creature with mass can fly like that, so it looks wrong. Perhaps they could get away with it with the notion of huge air-currents they can hover on like birds of prey, but they'd need those forces to be in game, and to move the wings, and generally look like there's something holding them up.Dragons aren´t supposed to hover?
It's a game that appears to have no (or very selective) gravity, which doesn't fit in well with the notion of these being very physical creatures.