Kae Yoss hit the nail on the head, concerning the Forgotten Realms,(which I dont use). Most campaign worlds have histories spanning much greater time periods then our own 2000 years or so of recorded history. How many masterwork,(in real life terms) have been made by humans? Now multiple that figure by increased time span and numerous intelligent races and the preponderance of magic items becomes apparent.
People make magic items in D&D, and in D&D "people" includes a lot of races from elves, dwarves, drows, mind flayers, outsiders so on and so forth.
As for Elder Basilisk, thanks for the Beowulf quotes, always appreciated, but they really dont show much other than one cant directly take story and translate directly to game mechanics.
Frankly Wiglaf's sword and the stabbing dagger could have been made from the same material to bypass DR, Beowulf "gathered his strength" before he struck with the dagger, again maybe he did strike a mighty blow, ohh but that doesnt happen in 3.5 so it cant be that.... the story must be wrong
I think you see my point stories provide flavor which you can try to have rules emmulate, but dont try to apply game mechanics,(and especially game mechanics that change like power attack) verbatim to a story as proof of an interpretation.
Now on to you Straw Man argument, I dont believe I have ever said Dragons should have unbeatable Damage Reduction, nor did I explicity state that Dragons should have DR/ unfindable substance,( I did make a vague Adamantium suggestions).
I have said repeatedly that Dragons in 3.0 had damage reduction that increased in both numerical strength,(5/+1. 10/+1) as well as in the power of the magic weapon needed,(10/+1, 15/+2), which is something that is lost in 3.5.
It may not bother you but it does bother me that the Iconic monster,(it's not Dungeons and Demons), loses a very nice defensive power. It cheapens Dragons a bit, it removes a bit of flavor,(the need for strong magic items), inherent in fighting Dragons, ironcialy in serivce to the new DR system that was designed to add more flavor overall to the game.
Are Dragon's gimped, nerfed, spat upon, or generally wrecked by the change...nope still pretty bad mofos in my book.
Does the change really effect parties fighting Dragons...
not really as Stefan argued, for the most part parties had the items needed to overcome 3.0 DR.
It does change the undestructable tone of Dragons a bit, it does make it easier to fight them, a change I'm sure many people like as many felt that Dragons were overpowered in 3.0, I'm just not one of them.
Frankly I will probably leave Dragon DR as is for 3.5/ except for the last DR increase where I will add adamantium to the magic requirement. I think this does a fair job of recreating the strengthing that was in 3.0, and makes ancient Dragons truly fierce.