Dragons would be fantastic! I could see them coming in a general fantasy game pack/expansion (one that focuses more on fantasy worlds and troupes more than just magic.)
My idea for a pack would be a "Dreams and nightmares" expansion pack (or a "sweet dreams" game pack, that might be more fitting.)
In this expansion or game pack, a sim can still sleep normally in them, but while the sim is asleep, clicking on them will reveal a new interaction to "explore dream." After this, the game will load in one of 2-3 new locations at random, kind of like a travel option. Plenty of new wacky items, interactions, moodlets, etc. Would be able in these dreams. Everything that would happen in these dreams would stick with the sim as they got up and give them moodlets for the day, depending on what they did.
Nightmares would also be an interaction similar to dreams, happening when the sim goes to bed with a negative moodlet, and would have different locations. They have things that can help sims get over their fears, give them fears, or just make them terrified. I think it would also be amazing if there was a small chance a sim could get stuck in a nightmare.
The "dreaming" skill would be a new skill that would allow for more abilities within dreams, i.e flight, transforming items into animals, making dream potions that do... very intresting things, and taking sims from the outside world into the dream at will.
For some new traits, "Nightmarer" and "irrational."
The Nightmarer trait exclusively gives the sim nightmares, but also heightens moodlets gained from it. (More risk of absoulute terror, but when managing to get somthing positive, it's an incredible effect)
The irrational trait makes sims scared around every corner. They pick up on fears that other sims just don't have (fear of freezer bunny, anybody?) They can discuss terrors and discuss hypotheical situations with other sims. They will also not take risks.
I think a lot of new sleepwear, new costumes, and some general dreamy outfits would be fitting CAS additions to this.
There's a lot of building item potential for this pack too. New beds, obviously, but also castle style builds. Plenty of potential for dream items, like a fountain of youth, a dream tunnel, a monster den, or a Pegasus carriage, perhaps.
That's my idea for a sims 4 pack!