The dragon appeared to be speaking to someone other than you as he didn’t immediately notice any of you. Eventually he did track each of you down and smell you, but even then he seemed to be savoring your aroma more than looking at you specifically. Only when he smelled Colbey did he seem to wake up. (I can post the exact words he said about each of you if you want).
He pondered what to do with you all for a bit, seeming unwilling to eat you (although he may have meant something else). Eventually he settled on sending you down to the undercity to find the descendents of his old minions. He wants you to find objects that have been in close proximity to the most powerful creatures down there; anything that would pick up their smell, the stronger the better.
You manage to make your way down to the Gobbles unharmed and made a beeline for the Hobgoblin HQ. Through some fast talking initiated, surprisingly enough, by Velak, you managed to get into the Hob’s good graces and even got the Hobgoblin leader to turn over a pair of his rancid long johns (which the dragon seemed to savor… ewww).
With the Hobs in the local area tolerating your presence you started the crossing into Orc territory, and thus began the battle on the bridge.