Corrected entry: On Pete's first day of school, all the fishermen are complaining that there are no fish and it is his fault. Pete says "Elliot will bring them back" and one responds that he is talking dragon again. But none of them knew that the dragon was named Elliot, so how did they know who he meant?
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Correction: As I recall there is a whole song and scene where Mickey Rooney and the whole of the town folk sing and taunt Mickey Rooney about the "dragon" in the bar before the school scene. Hence the, "He's talking dragons again," comment. Additionally, when Pete walks into town Elliot causes havoc which he blames on the dragon, which also takes place before the school scene.