Yes.
Why can't a dragon priestess ride a bear? So many people are surprised by this...
That is not what happened and we had no legal issues.
The reasons for removing dragons were multiple:
1) The creator of the mod pointed out they were initially supposed to be a legend in his view of the Perisno universe.
2) They looked bad and were not animated. Stuff like this just doesn't work in Warband (unless you're from China, they did break some barriers). And we attempt to make Perisno a quality mod rather than second Paradigm Worlds.
3) Finally, yes, while replaying HOMM 5 about a year ago I suddenly realized the dragons are clearly from that game. I don't know who exactly added them to Perisno, but my guess is that somebody from the Chinese M&B forum ported them (they have a lot of HOMM mods for WB using ported assets), posted in the "resources" section and somebody else who was not familiar with HOMM thought it was OSP assets and added them to Perisno.
All things considered, dragons were removed. But no-one forced our hand.