I stopped at 21 hit dice because most of the dragon abilities hit there cap at around that amount. There saving throws max out, their armor class hits the typical cap for the edition, and there THACO hit 0, which I feel is a good stopping place for it as it makes calculation relatively easy. I could have gone beyond 21 hit dice (and in fact, I still might do an extension of the table and rules) but I would have to abide by those caps, which would make future progression all but stop with the exception of hit points and damage.
As for the damage, remember that PCs cap out at 9 or 10 hit dice (unless you happen to be playing an Athasian dragon or other advanced being) only gaining tiny amounts of hit points after that point. Also, the only ones who can gain more than 2 extra hit points per hit die are fighters, and even they cap out at 6 if they somehow end up with a 25 con score. Outside of playing a Athasian half giant, the maximum hit points for a character is somewhere around 150 for a fighter with a 25 con score who rolled maximum for all there hit points. Most characters will have one third to one half of that hit point amount. So while a dragon's damage may seem low, the damage that they do deal will very quickly add up.
Also dragons under my system have much, much better survivability than normal dragons. A 21 hit die dragon has well over 200 hit points, only fails saving throws on a roll of 3 or less, takes reduced damage from many attacks, has 50% MR, and can suffer several instant death attacks without going down. A fight with a dragon is unlikely to be a quick affair, so the damage a dragon can deal will add up round after round.
Plus adjusting the damage up is relatively easy. My personal suggestion for doing so if you think that their damage is too low is too increase the damage a dragon deals with each attack by an amount equal to half its hit dice. That way as a dragon increases in size, its damage will grow both through the damage die and through a static modifier simultaneously.