That progression looks good, and yeah, let's give 'em Hover as a bonus feat.
Should the flight be supernatural, like a beholder's, and thus grant the permanent feather fall effect?
This is looking great!
I vote for Ex flight since it has wings.
How about both! We could give it a SQ something like this:
Flying Inferno (Su): A flying bestiary dragon continuously generates blasts of superheated air that blast all creatures and objects in its vicinity - see the table below for the intensity and spread radius of this fire damage. The dragon can direct most of the force of this heat-blast downwards, giving it the equivalent of a permanent
feather fall effect and Hover as a bonus feat.
Should the dragon be unable to generate a flying inferno it is still able to fly using its wings alone, although its flight is slow and ungainly (fly X ft. with maneuverability Y).
The damage in the table is quite high compared even to many breath weapons. Decrease it somewhat?
That's my thinking too. Its breath weapon damage is identical to the 2nd edition AD&D Red Dragon, except it is doing it every round instead of every 1d4+1 rounds.
The SRD Red Dragon does 2d10 breath damage per age category. If we were just aiming to make the average hit points/round equal it'd be about 29% the damage (average of d4+1 = 3.5, 1/3.5 = ~0.28.57), or 3.14 damage/age. If we round that to the closest die it's 1d6/category.
However, I reckon we'd better boost the damage a bit since energy resistant effects knock a lot more damage off an attack spread over 2-4 rounds than the same energy damage inflicted in one hit. Somewhere around two-fifth to half a SRD Red dragon's breath weapon damage should be OK, which works out either 1d8/age or 1d10/age.
So, which do you prefer, 1d6, 1d8 or 1d10 per age category per round?