1. Put them in minecarts and fling them out over your walls. Only let the ones who can fly back in.
2. Form a Pseudopolis Light Dragons, a unit of cavalry that uses dragons. Here, nether cap armor is good. Maybe
3. Build fire spouts in the
floor: grates over pastured dragons. Or the ceiling. Or the walls, with fortifications. Or all three. Apparently Dragonfire only works on the same z level
4. Gladiatorial combat with retracting bridges is always a favorite.
5. Burn the elves in their wooden armor.
6. Lower the breeding rate.