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.
The damage in the table is quite high compared even to many breath weapons. Decrease it somewhat?
I think the flying inferno is unnecessary, really. But 1d6 or 1d8 per age category seems ok for the damage.

Let's simplify it as follows:
Flying Inferno (Su): A flying bestiary dragon continuously generates blasts of superheated air that burns all creatures and objects in its vicinity. The flying inferno deals 1d8 points of fire damage x the dragon's age category. The following table indicates the radius based on the dragon's size.
Tiny - 5 ft. radius
Small - 10 ft. radius
Medium - 15 ft. radius
Large - 20 ft. radius
Huge - 30 ft. radius
Gargantuan - 40 ft. radius
Colossal - 50 ft. radius
1d8 sounds like a good balance for me. Without the flying inferno, reduce both maneuverability by one grade and speed by 50 ft. then?
I'd rather not give it a speed penalty, but since it seems several of you fancy this ability, let's give 'em a speed boost of some sort.
In other words, keep the original speed progression untouched for regular flight, but allow for a Su boost via the "thermal riding".

(Dungeons & Dragons)
Rulebook featuring "high magic" options, including a host of new spells.