It’s just another unneeded additional storyline that the writers love to randomly add.
Yes this is frustrating. If they didn’t have a commitment from someone–Jaime or Agnes, whichever way they wanted to go–then they needed to not have the Dragon drop this massive “I have a daughter” bombshell. If they never intended it to be Lily then holy unnecessary sub-sub-sub-sub plotline, Batman!
Mmmm, random theory: The Dragon specified he “lost” a daughter. Which could mean it is not any character in Storybrook, because maybe this daughter died. We have to remember that David slew a random dragon way in the past. We all wondered if maybe he had unknowingly killed Lily’s father, but do we know if that dragon was male or female? What if that dragon was this lost daughter?????? SFG
Ooooh, that is a very interesting theory. I’m not sure how to tell what a dragons gender is so will leave it for the experts.