Imaro
Legend
What interests me is that actions it cannot take, such as raining unavoidable fiery destruction upon a helpless band of low-level PC's.
And why can't it? Simple, it would be bad for the campaign. The needs of the game outweigh the needs of the simulation.
No one said the dragon couldn't (though looking at the dragons in the 4e MM, even a 1st level character has a chance to survive most if not all of their breath weapons so it wouldn't necessarily be instant death. I mean you are taking into consideration the rules of the actual game...right?).
However if you're going to argue against simulationism or sandbox play (especially without consideration that for some people gameplay in an rpg sucks without simulationism), then it's important that the constraints of simulationism be addressed as well. In this context it is definitely important to establish the dragons, how, when, why and where and make sure it is consistent as it pertains to the gameworld, otherwise you are not ascribing to sandbox play or simulationism and are not being a fair referee or arbitrater (and this would be true no matter if your concerns were simulationism/narrativism or gamism).
If it makes no sense for the PC's to be attacked by the dragon it's not really simulationist or close to realistic...is it? It is DM Fiat which is not what we are discussing. In a simulationist game the PC's often have the chance, because their is consistency and logic, to make choices that rely on... in-gameworld logic, trickery, cunning, etc. to get out of situations that approaching with direct combat would probably result in their death. Is this good gameplay? Certainly for those who enjoy matching their wits and cunning against the gameworld as opposed to the mechanics. But it is not achieved in the same manner you seem to insinuate good gameplay takes place in (level-appropriate challenges)
And again I want to point out that your example avoids any application of the actual game rules. If the dragon rolls a series of ones on it's breath attack... the PC survives because the Dragon didn't kill him, so no the DM doesn't have the right to still make him die. If the PC's are in a cave to small and too far underground for the dragon to attack them, then no the DM cannot (if he is doing sandbox play) auto-rule the PC's still died.