Wylina has a pretty solid guide up for this game. What I'm putting here are some tips and tricks I've figured out, to make your gameplay faster and easier. I've tried to put them in a logical order for you
From levels 10-24 or so, you can level ridiculously fast by running Stone Head over and over again without even moving; your mage's Mystic Orb will take care of everything quite handily, and there are no drops to miss. It took me 20 minutes total to advance 14 levels, including a fair amount of time spent with a very low level Mystic Orb because I was levelling things poorly early on. You'll level once every two visits until level 12 or 13, then once every three until about 21, then once every four until about 24 (I don't remember the exact numbers... sorry). This does not work in Hard mode, as it takes a very long time to kill him for very little experience, but the Semi-Boss can be killed rather easily to level up once every 3-4 minutes up to level 38 or so.
Once you're at the level you'd like to be at, you can go to Hill Top level 8 and kill spearmen over and over again to farm for food to feed your dragon. The revivers will keep bringing them back, and each time you kill them they can drop something new, so this is a fantastic way to grow your dragon to full size before moving on to the next act. Between the fast levelling and growing your dragon, this will give you a tremendous advantage for the rest of Normal difficulty. Their drops disappear when they are revived, so be sure to grab them quickly.
When waiting for your dragon or Mystic Orb to kill something (i.e. farming Stone Head), it goes faster if you switch to a different window and let it happen in the background; you'll hear the sounds all happen faster, and you'll be able to tell when it's done because the sounds stop. On my computer it takes half the time when running in the background.
When off-screen, your friends can do damage but cannot be hurt. What this means is that on levels like Oh Snap in Hard mode, once you've cleared out a corner as being safe you can hide and let your dudes kill everything 100% safely as long as they're off-screen. Similarly, enemies who are off-screen can't attack (i.e. scorpions, green blobs), but can take damage. Also similarly, when you open your Inventory or Options screens the enemies will still attack, but your guys won't, so be careful with when you do this and make sure you won't get anyone killed.
In Hard mode if you go to Hill Top Level 4 you can quickly and easily circle the spearmen around so they all attack from the same side, stand back and let your dragon take swings at them and kill them. Do something else in another window for an hour or two and you'll find you've levelled up a few times. Or, if you want to farm, use this level to pick up gauntlets and dragon swords (which sell for the most at this point in the game, with masks a close third), and cash, while your dragon kills the guys over and over again for you; you don't even have to move once you've set them up. With help from your mage's Mystic Orb, it will take 32 attacks for each one to die once.
Why Level 4, you ask? Hill Top Level 8 has more guys to kill, but they're harder to corral and there are 8 revivers waiting for you when you decide you're done, which is why I prefer Level 4 in Hard mode; the exit is safer. Level 8 in Normal, Level 4 in Hard. This is not the fastest way to level past level 40, but it's certainly the easiest since you can literally walk away from the computer and come back and be levelled with no threat of death. Hell, set it up before going out to dinner.
Scorpions are very predictable; they move for a few seconds, stop, aim, then fire. If you get the rhythm right, you can run in, hit them, see in which direction they'll attack, get out of the way, then move back in. Be sure to do this from a different angle than your friends are at, though, because they aren't as nimble or able to dodge as you are, and even if you get hit the scorpion's projectiles continue on through you to whatever's behind you.
The effectiveness of your mage's spells is diminished in Hard mode. When fighting Stone Head it takes 30 Mystic Orbs to kill each hand, which is very time consuming, but if you run up and attack then your weapons will kill the hands much faster, despite probably doing less damage than that listed by the Mystic Orb.
Life Steal is cumulative based on how many people you're hitting. By that I mean if you have 3 Life Steal and you hit 5 enemies at once, you'll gain back 15 life. If you're near the end of the game and have 11 life steal and hit 5 enemies, you gain back 55. And if you're wielding two weapons at the time, you get it back twice.
Because it takes a long time to finish this game, and because you get the Merlin's Apprentice medal as soon as you return to town after hitting level 49, I recommend closing the game and refreshing the page when you reach level 48. This will re-establish the game's connection with the server, and should ensure that you get credit for the last two medals when you get them. If you're not confident that this will work, you can back up your game data as follows:
1. Navigate within your computer to C:\Documents and Settings\[your computer username]\Application Data\Macromedia\Flash Player\#SharedObjects\[random characters]\uploads.ungrounded.net\516 000
2. Find the directory 516950_dragonboy.swf
3. Copy it in its entirety by clicking on it and holding the mouse button, pressing Ctrl, dragging the mouse away from it to open space, and letting go of the mouse button
Now, if you don't get credit for the medal you can close the game, rename the original directory by adding "Original " to the beginning, and rename the copy by removing the "Copy of ", and you can start over again. Once you've opened the game and verified that everything is as it should be, you can repeat the steps above to create another copy. NOTE: If you mess this up, you could lose your game data, so only do it if you're confident that you know what you're doing.
And finally, here are the best items in the game, as compiled by waynerz99:
Camerons battered Iron Axe
Dragon sword of nobility
Luemars Deadly Mace
Tower shield of Godzilla
Spiked Gauntlets (40 damage / 40% chance of double damage)
Dragon Shards Of the Forum
Nike Greaves
Full Helm Of Salvation
All of these vary in cost between $1700-2000
JakNoclaf
Why won't my dragon eat the damn foot?