The island of Draconia is located off the northeast coast of the elven city, Ab'Dendriel (here). There are no human inhabitants on Draconia, as this island is thought to be a dragon graveyard. Also, there is an ancient pyramid filled with undead creatures and some hidden secrets inside.
The surface of Draconia contains nothing but Rotworms. Below the surface there are three lairs with Dragons:
One single spawn is located at the western coast of the island.
Another single spawn is located on the southeast of the island, in the room with the exit teleporter.
A double spawn is located below the northeastern part of the island.
Dragons can be roped up to the surface, as all lairs are 2 floors underground!
On the northern end of the island is a mountain, containing one Dragon and one Dragon Lord on seperate floors.
The island seems to be ruled by an Old Dragonlord who lives on the top of a mountain. When you get to see him, he won't say anything besides the fact he is desperate for white mushrooms. He will also reward anyone who brings him one.
If you greet him while having a White Mushroom in your backpack, he will instantly exchange it with a Dragonfetish, which can be used as a sacrifice to activate the exit teleporter. However you can not get more than one fetish this way, as the NPC will tell you to leave the island at once if you talk to him again. The only ways to leave Draconia is either finishing the Draconia Quest, sacrificing a Dragonfetish or walking all the way back to Hellgate and exit the normal way.</spoiler>
The only way to Draconia is through a tunnel below the seabed passing through the dangerous Hellgate and climbing to the surface via the Red Bone Castle, which marks the entrance to Draconia.