Knight Otu said:
I had in mind that it could grapple more than one creature, but could not instantly extract (it would be extremely deadly otherwise), just as the ability was written.

(not that it could not use a rewrite...)
it wouldn’t be any more deadly than a mind flayer, except for the higher attack values and grapple checks of course. Now, requiring it to maintain a hold for 5 rounds plus the victim’s Con mod could be a very long time, meaning it could extract perhaps the brain of one victim at most during a combat (unless it is fighting foes much weaker than itself).
Trying it again, more like the way it was:
Extract (Ex): A brainstealer dragon that maintains a hold with a tentacle for a number of rounds equal to 5 plus the victim’s Constitution modifier extracts the opponent’s brain, instantly killing that creature. This power is useless against constructs, elementals, oozes, plants, and undead. It is not instantly fatal to foes with multiple heads, such as ettins and hydras.
Improved Grab (Ex): To use this ability, a brainstealer dragon must hit a creature within one size category of itself with a tentacle attack. It can then attempt to start a grapple as a free action without provoking an attack of opportunity. If it wins the grapple check, it establishes a hold and begins to extract the opponent’s brain. A successful grapple check each round furthers the extraction process and deals automatic tentacle damage. A brainstealer dragon can grab a creature more than one size category larger or smaller than itself, but only if it can somehow reach the foe’s head. A brainstealer dragon can hold one creature in each tentacle, but cannot grapple an opponent with more than one tentacle. An opponent can escape with a single successful grapple check or an Escape Artist check.
Also, do you want to keep this range?:
Telepathy (Su): Brainstealer dragons can communicate telepathically with any creature within 100 feet times it's age category that has a language.