The reason the dragon said the paladin could live was because the paladin rolled a pretty strong persuasion roll when explaining to the dragon that he had trespassed on its territory because he was completing a world-shaking mission, the success of which would also benefit the dragon (by ridding it of the great undead dragon that had recently ousted it from it's previous territory.
I thought the player would get that this was a great moment to push the 'I am on a mission from God! Mess with me, mess with my God!' angle. I mean, even the coincidentally climactic background music pointed that way, I thought!
But he just thought 'F*** you, your picking on me', I think. I really don't.
Thanks for your advice. I've been playing for 33 years and made a mistake, I know that.
And to those who have been writing pretty venemous stuff as if I'm one of those dick GMs who just torture players, you know, you can fill the gaps.