The script can be read here but below is a synopsis.
The heroes battle and defeat a frost giant. Afterwards Eric comments that the "fire in the ice" would show them the way home. A lurking shadow demon overhears. A blue and red sun sends a ray of light into a nearby glacier and Hank fires an energy arrow at it and the glacier splits apart revealing a portal home to the fairground. The heroes rush to the portal but it is destroyed by a mystic bolt from a nightmare-mounted Venger. Venger then uses his sorcery to seal the glacier, potentially crushing the heroes to death, but Hank fires an energy arrow into the ice and burns a tunnel through which they escape.
Despondent, Hank decides to somehow use Tiamat the dragon to defeat Venger. Dungeon Master appears with a new quest involving defeating the Duke of Darkness but Hank interrupts, saying he is not interested and only wants to know how to find Tiamat and how to use her against Venger. Reluctantly he tells them that Tiamat lives in the Dragon's Graveyard and that they simply have to ask her for help against Venger. He adds that they carry the way to find the graveyard with them before disappearing behind a rock. Sheila voices concern over what they are going to do with Venger and Hank replies, "whatever it takes".
Emerging from the glacier shadow demon informs Venger that the heroes have escaped. Venger is enraged and destroys the glacier with mystic bolts, vowing that it will be the last time they evade him.
Hank has a moment of introspection on a column of rock before the heroes trek across some mud flats hoping to find the Dragon's Graveyard. Eric deduces that Dungeon Master meant their weapons when he said that they carry the way with them. Hank is about to test the theory by unleashing an energy arrow when they are attacked by a nightmare-mounted Venger.
They flee into a cave but Uni is badly injured by one of Venger's mystic bolts. The cave collapses, with Diana buying the heroes time by bracing a collapsing ceiling with her javelin, and the heroes find themselves sealed inside.
Testing the theory about their weapons leading them to the graveyard Hank fires an energy arrow. It ricochets into Presto's hat and emerges as a pink globe of light, then bounces off of Eric's shield and turns golden, then is batted with Diana's javelin and turns green, growing in size. It approaches an uncertain Sheila who throws her cloak of invisibility over it and it emerges bigger and now purple. It floats towards Bobby who is worried it is menacing the wounded Uni and bashes it with his club. The globe of light explodes in white light and teleports them to the Dragon's Graveyard, just as Venger breaches the cave to find them gone.
The graveyard seems to be inside a lunar crater and littered with dragon bones as well as the skeletons with dragonish skulls who clutch weapons. Sheila deduces that this is where their totems came from.
Bobby test runs a sword that effortlessly cleaves a rock in half.
Presto blows a horn that attracts the attention of Tiamat who was inside the eye-socket of a giant dragon's skull. She is enraged at their trespass and attacks. The heroes are surprised to find their totems more powerful than usual but still not enough to defeat her. Presto mentions about Venger and Tiamat stops her attack to question them about her nemesis. Tiamat is pleased to hear that they want to defeat Venger and explains that in the graveyard their totems are powerful enough to defeat Venger but that they must fight him there. She flies off through a wormhole, saying that she will help them.
Venger is musing in his castle about claiming the heroes' totems when Tiamat smashes through a wall and announces that he will have his chance to claim them in the Dragon's Graveyard. He hurls a mystic bolt at her and she responds by opening up a wormhole behind him and beating her wings together so that he is blown through.
In the Dragon's Graveyard Eric test runs a trident that fires electrical bolts. Sheila picks up a glowing net and comments that it feels alive and not like a weapon.
Venger tumbles through the wormhole and commands the skeleton warriors to rise up and attack the heroes, which they do. One with a whip lashes Diana's javelin from her hands. The one with a trident fires an electrical bolt at Eric. One with a sceptre conjures shackles around Presto's feet. One with a flail conjures a whirlwind that knocks an invisible Sheila down, blowing her hood off and rendering her visible. The heroes overcome their attackers though with Bobby stranding Venger on an island surrounded by a chasm, courtesy of his club's earthquake function. Presto then shackles Venger's hands to a rock with conjured glowing orbs.
Hank notches an energy arrow, possibly contemplating executing him, then fires two arrows so that they unshackle Venger from the conjured orbs. Acknowledging the mercy Venger falls to his knees and bows his head before questioning why he was not executed. Hank explains that he would be no better than Venger if he acted as executioner, and that he did it for the heroes' moral welfare rather than as a mercy to Venger.
Bobby questions what will happen to the injured Uni. Dungeon Master appears, holding the glowing net, and says that not everything in the graveyard deals death. He then places the net on Uni which heals her. Creating an energy bridge across the chasm he approaches Venger and addresses him as "son" before teleporting him away. Eric asks where Venger went and Dungeon Master replies "back to the Realm". He then teleports the heroes back to the Realm too, adding cryptically that they have taken their first step home and possibly alluding to the mercy they showed Venger.
Tiamat watches them leave. Her four flanking heads are asleep but the central fire-breathing one has an unfathomable expression. Her eye glows as some sort of conclusion.
Michael Reaves stated that The Dragon's Graveyard was the first part of a trilogy exploring the dynamics between Venger and the Dungeon Master. The second and third parts being The Dungeon At The Heart Of Dawn and Requiem.