Thanks for the pointers. Yeah I looked at the flying only with a light load, but it also specifically mentions in the Dranomicon the dragons are quadrapeds, and thus have a higher carrying capacity. Using the size modifiers, modified for quadrapeds, in the PHB adventuring section gives them the strength to carry the character plus some good armor when they get to the size necessary to carry the character (one size category larger). Armor only weighs double for non-humanoids, and another double for large size, so quadruple. I am going to rule that the twice doubling is a quadruple in this case (though by normal rules its a triple) because of physics and my version of common sense.
So the consensus so far is to allow dragons to wear armor - providing they follow normal proficiency and flying weight limits.
Thanks for the info and thoughts guys!
Aaron