I got the dragon armor in every game without difficulty so I am sorta at a loss as to why you are having the problem. I think it may be because you have not gotten the quest yet and Sir P won't have the dialog if you don't have the quest so . . . here is a post which covers how to get the quest.
Edit: Seems like you had to speak to the Dwarf King a second time to get the quest, first time he is simply acknowledging the existence of the set. Did you have the note from the caves when you talked with him??
********************************* There be spoilers beyond here********************
Dragon Set
- The belt is in an abandoned house of Verdistis. The house should be to the
WEST of the town. When you get inside and walk towards the hatch, the
floor will break and you'll land in the basement.
- The shield is in the armory of the Stormfist castle. If you were already
kicked out, approach the entrance, and fling your pyramid through the
entrance and you'll be able to visit the castle again (just avoid making a
mess because this seems to be an exploit and not something intended).
- The gloves are in one of the burial pyres in the Elves Burial to the
south. keep looking out for a selectable pyre cuz it's the only one that
has anything inside.
-
The quest to get the armor is given to you by the dwarf king. To enable
it you MUST bring a note from the caves (same caves where you get the ax)
that proves the king brother's guilt (it's a study in the very north east
corner of the caves). It's hard to get because you must defeat an
extremely tough wizard to get there. When you are about to enter the
throne room, you might need to use the fling trick (just throw the note
inside the room and pick it up after the checkpoint) to get the note past
the checkpoint where the guards take all your stuff away temporarily.
After you talk about the note's subject, the king will tell you that you
need to get the armor and the dragon heart. If you complete the Axe quest
by giving it to the king you get the armor quest. If you complete the axe
quest by taking it back to the town yourself and talking to that priestly
type you don't get the armor quest!
Armor: go to Sir Patrick at Verdistis and after you ask him, he'll send you
on a simple and quick errand (be sure to have 2500 gold handy).
Dragon heart: This is another tough one. Go to the warrior's guild and ask
for admission. After the first quest, you'll be sent to retrieve it. I hope
you didn't kill the dragon rider in the imp's castle before the quest was
given.
After you have both, just go to the dwarfs' smith at the halls and after a
day's work hell have the plate ready.
- Show the restored dragon armor to the dwarf king (get it through the
checkpoint) and you'll get the helm.
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Quoted from
here . . . hope this helps . . . =)