yes, there is a dragon, but we'll let you fight it when you get there. BTW: I would have go with the 'Sword of Aeons' I love being good, and i am often, but it makes me sad that there isn't any temptation to being evil because of it. I like the choice. This way, the only reward to killing your sister is to say you did... In the original Fable it was actually a hard choice, and there was a real reward with choosing evil. It just lost all purpose...
