Well, I do not have any experience with playing high elves, but as you said the dragon is costly. It is also not to be used to much as a close combat-type heroe, becasue a challenge would quickly kill the mage
IMHO.
Maybe a unit of dragonprinces and a mage on a horse would be a nice idea for the time being. In the story it could be that the mage is looking for a dragon so he can become a dragonmage, something he has dreamt of every day since he was borne
at 1500 you could try a dragonmage to see what it can do, at 1000 I think he might break the game, or suck terribly...
good luck with the idea though...