What significance does the mythical dragon hold within Buddhism and why, where does it originate within Buddhism?
Nagas are serpent like creatures that are also identified with dragons. I'm aware of a couple of places within Buddhism that these appear but there are undoubtedly a lot more.
The Buddhist philosopher and Mahayana pioneer Nagarjuna is reputed to have recovered the Perfection of Wisdom sutras from the Nagas. He then went on to distribute the sutras to the world at large.In addition Naga's would come to him while he was preaching and provide shade to him while he was teaching.
Again from with the Mahayana tradition, the Nagas appear many times in the Lotus Sutra. The Dragon (Naga) Kings daughter has a starring role within one of the chapters. Although she is young and female she nevertheless attains Buddhahood. This points to the fact that everyone (even if they are young or a woman) can attain the highest spiritual perfections.
The Dragon, (in Pali, 'naga') is just simply a term for any very large or substantial invididual or animal.
For a sutta which is otherwise drivvle, a sort of flattery common to the courts of kings, but which makes the definition clear.
The Buddha is often characterized as a Naga. There is no mysterious significance.