Dragons can do so much that traditional aircraft can't. Even if they have zero direct combat capability, they're incredibly useful.

A dragon is the ultimate all-terrain vehicle. If you need to evacuate an injured soldier, send a dragon. They can fly, swim, climb, crawl into (relatively) small openings, move debris, dig, communicate with others, and sense their surroundings. With some EMT training, they could even stabilize a patient before hauling them off. They can land on and travel across extremely uneven, slippery, or muddy surfaces without much problem (also why modern search and rescue teams still use horses). In a pinch, they could land or take off from something as small as a ledge, or possibly even from a vertical surface like the side of a tree. Nothing else at your disposal can even remotely do all of that.

Fixed-wing aircraft have a minimum safe airspeed that varies based on altitude. If they drop below that, they won't generate enough lift to stay aloft and won't have enough time to regain it before crashing. As a result, they can't handle low-speed, low-altitude operation. Helicopters can do it, but it's still risky due to the physics involved with flying close to the ground. They're also not very agile when doing so. The only thing we currently have that can do this well are extremely light aircraft like quadcopters, which have limited carrying capacities and range. Dragons can naturally do all of this without a problem. They can skim the ground at slow speeds looking for a target, then snatch them up (or drop off supplies) and zoom away. They can achieve the near-vertical takeoff of a helicopter with less horizontal clearance required, and then switch to "glide mode" to travel long distances fairly easily. In an urban warfare scenario, they can weave between buildings and around obstacles like nothing else.

One of the oft-overlooked benefits is the fact that they're made of flesh and bone and not metal (yes, that's a good thing). They're durable and resilient in a way that no artificial aircraft will ever be. One of the most difficult landings in the world of aviation is landing on the deck of an aircraft carrier in rough seas. It's a nightmare for jet pilots, and even experienced helicopter pilots have trouble with it. Here's a scenario: a wave tosses the ship, causing the deck to lurch upward and impact the bottom of a landing aircraft just before it touches down. That's enough to bounce a jet off the edge of the deck or to knock a helicopter out of the air and onto its side. In both cases, it can be fatal for the aircraft and its occupants. When that happens to a dragon, he just says "ouch", picks himself up, and dusts himself off. The same goes for other situations that are problematic for aircraft, like heavy fog, strong crosswinds, clipping a tree/mountain/powerline, etc. Flying creatures are well-suited to handling rough landings and other types of external forces disturbing them during flight. Most of them can detect and adjust for such conditions completely subconsciously, similar to how you or I might react when going down the stairs and your foot slips off a step. Your brain and body are hard-wired for keeping yourself upright and stable in a way that no machine will ever be able to match (watch a slow-motion video of what a cat or squirrel does when falling from height).

Along the same lines, dragons can be deployed defensively against lower-speed enemy aircraft. Some law-enforcement agencies are training hawks to take down small drones. This low-tech solution is effective because the bird can latch onto the drone and the drone doesn't have the mass, thrust, or agility to resist. Your dragons can do the same thing. They're much larger than a hawk, so they should be able to take out even the largest of drones. They could likely disable a helicopter as well, hanging onto the landing strut and either attacking the occupants or jerking the craft around to de-stabilize it. What would you do as a helicopter pilot if a dragon flew up from the blind spot below you, jabbed a hole into your fuel tank, smeared paint across your entire windscreen, and then disappeared?

Of course, there are all sorts of oddball things you can do with them as well. Several dragons flying in formation can create a radar shadow that can mask attack craft behind it. Use a team of dragons to tow small disabled watercraft back into port (or capture enemy watercraft). Use them as scaled-up carrier pigeons to transport messages, maps, and plans from ship to ship without worrying about radio signals being intercepted. Easily rescue sailors that fall overboard or whose ships have sunk. Fly up high with a large mirror and blind oncoming infantry, or take a spotlight and mark targets at night. Quickly shuttle a POW back to base so that you don't have to waste infantry on guard duty. Cold-blooded reptiles would be better suited for desert infantry work than a warm-blooded human. A low-budget opponent could use dragons as dive-bombers, turning dumb bombs into guided weapons without any additional R&D or technology.

Dragons' low maintenance makes them a great option to hand out when you want to support resistance/insurgent forces.

It would be pointless to gift an F-35 to Kurdish or Syrian forces who don't have the air bases, pilots, mechanics, fuel, and spare parts that make up the $40,000 per hour cost of operating an F-35 - but dragons just need a few sheep and a cave.

A dragon has much less power than an F-35, but it still hits hard enough to decimate a supply convoy or unprotected base - forcing the enemy to build otherwise-unnecessary air defences everywhere.

You want them in regular armies too? Maybe dragons are used for squad-level air support thanks to their low maintenance.

The infantrymen know the air force is a great help - if they deign to show up at the right time. But it takes a while for a plane to arrive from a distant airbase, not to mention the bureaucracy, communications problems and inter-service competition.

As there's a dragoneer in each platoon, dragons can respond much more quickly to rapidly changing battlefield conditions. Why, a platoon without its dragoneer would be as naked as a platoon without its machine gunners or radio operator.

Every army officer knows the dragon has been the lieutenant's strong right arm since classical antiquity, when the Persian infantry arrived at Thermopylae without dragons, and fell in droves to the Spartans' integrated forces.

As someone else mentioned, Charles Stross had an entertaining and detailed look at how dragons would fare in modern warfare, though his "dragons" don't have that much in common with traditional fantasy dragons - instead, they're magical creatures deliberately evolved into their roles, controlled by geas and fed with the souls of slaves and enemies by their psychopathic-elf masters.

There's also Sword Brother by David Weber, which pits a demonic-dragon against an american APC armed with a machine gun. That one is a lot closer to traditional fantasy, while still taking a detailed look at how modern military weapons and training would fare against magic.

The problem here is that there isn't really a way to combine dragons with modern warfare, unless - as you've done - you use "magic" to overcome their fundamental limitations.

First: physics. The largest flying animal known was the Quetzalcoatlus. https://en.wikipedia.org/wiki/Quetzalcoatlus

And that's about the same size as the dragons you've proposed - and they do the "short hop and glide" style of flying you've proposed.

But, modelling suggested they only weighed up to 200kg, or roughly the same as two fully laden infantrymen. And the general rule of thumb seems to be that an flying animal can only carry around a third of it's weight; I haven't researched it, but I strongly suspect that an animal designed for "gliding" flight is probably going to be able to carry even less.

Overall, this means they have no real carrying capacity.

Then too, armour/skin capable of blocking conventional weaponry is heavy. E.g. a level 4 vest capable of stopping most armour piercing rifle-fire weighs around 15kg. Scale that up to something the size of a horse/dragon, and you're probably looking at 60-100kg. Which means that if your dragons are meant to fly, they can't have thick skin, and your "ablative" armour concept is definitely a no-go.

And that leaves you with a dilemma: either you drape them in armour (as per medieval horses) and weigh them down too much for flying, or you leave them unarmoured and easily wounded with conventional weapons.

And they'll also be slow - the Quetzalcoatlus probably topped out at about 80mph. And if they glide-fly, that suggests their muscle power is limited which in turn suggests their manouvering capabilities will be low. So they'll be easy targets for ground-based AA fire.

Then there's the question as their biology. First: their intelligence and their "trainability". In general, reptiles and birds are less "intelligent" than mammals; the former are cold blooded and don't have the energy to spare, and birds are warm blooded but have smaller brains. Overall, they're significantly less trainable than an equivalent mammal.

To be fair, birds can be trainable - e.g. crows, parrots. But whether they could be trained to "military" levels is debatable - and as anyone who's tried to train a cat will know, the fact that an animal is capable of learning something, doesn't necessarily mean it wants to, or that it'll be willing to perform on demand.

Then there's their physiology. Are your dragons warm blooded or cold blooded? If they're warm blooded, then they'll probably be more intelligent, and more active. But they'll also need a lot more food. And I'm guessing your dragons will be carnivores, so your human soldiers will need to carry around a lot of meat for them.

Equally, if they're cold blooded, they're going to be sluggish most of the time (especially at night), and will probably need long periods of rest and digestion.

As a guide: a komodo dragon can eat up to 80%(!) of it's body weight in a single sitting, which'd translate to about 150kg of meat for your dragon. Admittedly, the komodo dragon then potentially doesn't need to eat for a month, but it does then need a few days to digest. Which doesn't lend itself well to something being used as a weapon of war.

Still, I suppose you could feed human bodies to them, but that opens a large and controversial can of worms, unless you're engaged in total annihilation of the enemy. And even then, what happens if you get stuck in a siege situation? "Sorry Bob, you're today's dragon feeder. Here's a saw; there might be some shooting later, so you might want to take your other leg off and keep both arms...".

Any which way you cut it, feeding your dragons is going to be a logistical nightmare, far more so than horses (which can generally graze on wild flora when all else fails) and dogs (which are omnivores and require less food than humans).

And then, there's their fighting ability. Teeth and claws: great at short range, but you really shouldn't bring them to a gun fight, especially if you're effectively unarmoured.

Fire-breath (or your magic-nano-tech equivalent thereof. And how exactly do you reload a dragon with this stuff?). Range on this is going to be limited - the M1A1 flamethrower is limited to about 40m range, and despite the name, it doesn't throw fire. Instead, it throws napalm, aka the modern equivalent to greek fire: a viscous flammable liquid which will stick to anything it touches and continue to burn.

Then too, according to Wikipedia, the M1A1 carries about 40lb of fuel, and burns it at a rate of 0.5 gallons per second. Which I think works out at about 5 seconds of continual firing.

Put simply, your "nano-fire" doesn't have the mass to carry any distance, and won't stick-burn. Plus, a dragon won't have the carrying capacity for any significant amount of fuel, and it's debatable whether it'll be able to generate the pressures needed to attack anything more than a couple of meters away.

Finally, there's the time needed to birth, grow and train your dragon.

To use the Komodo dragon as an example, it takes around 8 months for the eggs to hatch, and then another 2-3 years before they become big enough to be considered an adult. And they'll need to be trained, exercised and fed for all of those years before becoming useful.

https://kids.britannica.com/students/article/Komodo-dragon/

By way of comparison, during WW2, the US army produced over 10,000 tanks in 1942 alone, and the training for an M1 crewman is 15 weeks.

Put simply, your dragons are useless for attacking (no armour, short range weapons) and useless for scouting (large, unarmoured, slow moving). Oh, and they need significant amounts of food, take years to mature, can't be mass-produced, and will need human handlers when on the battlefield.

Overall, if you're trying to apply real-world physics to your dragons, you'll have to seriously tilt things in their favour with yet more "magic science technobabble" to make them even vaguely useful in a modern context. But at that point, they're a dragon in name only...

Dragons have an advantage over aircraft: They produce less heat. Many weapons are heat seeking and won't work well on dragons, they need jet engines to lock on to.

Dragons can also land almost anywhere. Even a helicopter needs a fair amount of space to land and can be easily damaged if a rotor clips something. Dragons are more versatile, especially useful in urban environments.

Much warfare isn't about fighting other militaries, it's about fighting guerrillas and controlling the population. See for example the most recent Iraq and Afghan wars. Dragons would do well in a policing role, similar to how the police use horses because of their physical size and speed.

Un-Nerf them

You nerfed your dragons down to ridiculous and are now looking for a way out.

Well, un-nerf them. The size of your dragons is pathetic compared to almost everything else out there. In most fantasy worlds, they'd be baby dragons or Wyverns or something. The description of their breath weapon likewise leaves me unimpressed, where other worlds gives them not fire breath but fire breath that is hotter than anything else in the world, capable of melting not just metal, but stone.

In a world that has high-tech weapons, almost everything from a medieval world is a joke when it comes to combat effectiveness. A knight in full plate armour is no threat to a modern soldier with an assault rifle, even if he's riding a trained war horse. Same for fantasy creatures. Only the strongest, largest, most magical would be a factor - and you've taken the strongest, largest and most magical and reduced all of its factors until it's just another mid-level critter. No surprise you struggle to figure out how it could matter in battle, because it doesn't.

If for other reasons you need to keep your dragons at a power level that any party beyond 3rd level would laugh at, then you'll have to follow through and accept that they aren't scaring anyone on a battlefield.

Counterinsurgency

Remember that a single soldier with a rifle is also very weak against the kinds of weapons that you're describing. Ever since the end of World War Two, people have been predicting the end of infantry, and yet they are just as important as ever in a world of asymmetric warfare.

It sounds like the Moster Hunters are an insurgent force that keeps "popping up like whack-a-mole." That suggests that they're using irregular tactics. Dragons could play an important role in this kind of a setting. They could travel with supply trains and fly ahead to scout suspicious areas. They could engage in street patrols with infantry. They could use their celebrity power to make friends among civilians (Did you hear Cerbydon was in OUR NEIGHBORHOOD yesterday?! I love him!). All of these roles are important to the modern military and none of them require charging head-on into enemy AAA. And in modern combat, all of these roles are critical to combat.

As noted in a comment on the question, Charles Stross supposed in The Nightmare Stacks that dragons (or something very similar) could be used for air superiority in combined-arms operations. In his book, the result is a 1-1 draw between a pair of dragons and a pair of RAF Typhoons.

Unfortunately for the dragons though, the only reason they got the first plane was because the pilots had never seen anything like a dragon before, and had no idea of its capabilities. After a quick assessment of those capabilities, the surviving pilot had a good handle on how to take them down - and every other pilot then knew too. They just happened to get lucky in Stross's scenario because most RAF fighters are deployed overseas, and we only generally have a couple ready to scramble quickly because the expected threats needing to be escorted out of British airspace (i.e. Russian planes pushing their luck) tend not to be actively attacking. It was clear that had this gone on any longer, the dragons were toast when faced with a fast jet and competent pilots. I see no reason why this would not be the case for your dragons too.

So if dragons can't be air superiority fighters, what can they do...?

Air to ground close air support

After 40 years, the USA still does not have anything better than the A-10 Warthog for air-to-ground and close battlefield support roles. It was intended to be replaced by the F-35, but this has (almost) been cancelled and the A-10 has been prepared for another 20 years of active service. The key features which make it so suitable for the role are its low speed, the time it can remain on station, its impressive survivability, and raw firepower. Attack choppers such as the Apache fulfill a similar mission, with some extra flexibility but some loss of survivability.

Your dragons can fill this role in spades. They may not be quite as well-armoured as an A-10, but they will be able to manouevre much more tightly. As anyone who's watched a kestrel knows, being able to change your wing shape gives you a vastly different range of flight options compared to a fixed wing; and as anyone who's watched a pigeon trying to escape from a falcon knows, radical changes of trajectory make it much harder for anyone to hit you.

And that breath weapon is custom-designed for anti-personnel use. Anyone in an APC is probably safe, but anyone in the open is toast. Dragons may be vulnerable to flak, but strafing runs at treetop height are going to be very much their natural domain, and you're going to have to be very lucky to get AA trained on it before the dragon gets your AA gunner. Of course they'll be vulnerable to something like a Phalanx, but currently those aren't a regular feature of land warfare.

Why use them in combat?

As sources of lethal nanomachines, they should be kept well behind lines. The lethal elements could then be delivered by small drones or other munitions.

If the dragons really are long-lived and able to learn, they might make good generals, with more knowledge and experience than any human commander could accumulate in a lifetime.

Dragons are natural Fighter Jocks.

When it comes to powered flight, we humans are the limiting factor. Dragons are born to fly. They can take more G forces and can rely on their instinct for a lot of stuff. And what ever you do, do NOT get into a dog (dragon) fight with a Dragon, they will eat you for lunch!

And don't let their size fool you, the smaller the adult dragon, the better they can fit into an air-plane. The more they age, the longer they had to hone their skills.

With the current generation of fighter jets (the 5th) we have pilots who are younger then their planes. With dragons you might have some that remember flying in a Musquito or a Lightning...

And some dragons are so old and storied that they have become living legends. You want a fighter ace? (5 air kills) there will be dragons that have fought in 5 wars!

With all this, I doubt humans will be more then amateur pilots...

TERROR

Humans have an atavistic fear of being eaten. We also have a fear of being hunted. In an urban situation the simple knowledge that a couple of bullet-resistant, intelligent, flying lizards are coming to Eat You may be enough to break resistance, or even keep a town/city from trying to resist you at all. The same would probably be true to a lesser extent even in woodland or more open areas since the dragons you describe seem sufficiently small and quiet to still sneak up on people. I mean sure, you might take one out with a heavy machinegun or grenade in a confined place... but is that a risk you want to run? Of course this is dependent on the amount of dragons in a given society. If you grow up with a Friendly Local Neighborhood Dragon on your street that fear isn't going to be much of a thing. Just like people raised with dogs aren't generally afraid of dogs no matter how big and scary-looking. But if dragons are fairly rare, and the nation has a cultural heritage full of dragons pillaging the countryside in days of yore, the psychological impact of dragons could be immense.

Think how you, Average Joe or Tommy infantryman, would react to the certain knowledge that the enemy you're fighting has trained combat tigers. Sure a tiger isn't bulletproof and can't spray nanobots, but JESUS IT'S AN APEX PREDATOR TRAINED TO HUNT ME! A flight of dragons would be that fear cranked up to 11. It would be less effective against experienced and disciplined infantry, but conscripts and ISIL-equivalents would probably be terrified enough to bail or surrender rather than try and face them.

They'd also be handy as Military Police. Sort of a combination horse/police dog/drone that could help out with rear-area security, chasing down escaped POWs, overawing potential resistance in captured towns, and similar activities.

In summation, while dragons may not be useful in traditional peer-competitor battle situations, they could prove exceptionally handy in urban warfare or combat against medium to low grade infantry and as police forces.

Heritage and Patroling

When everyone will be focusing on actual combat usage, I try to give it a little bit of different perspective. It is not always necessary that we use an animal in actual combat, in many cases symbolic representations are as important as any. Similar to the examples mentioned below, you can use dragons, to:

1. Display your rich military heritage,
2. Use as border patrols to have a drone-like view of rough and difficult terrains.
3. Use as trained dogs to tackel the enemy one on one.

Horses

Horses may not be very useful in today's combat situations. But here are the Personal Bodyguards of President of India. These are not just showmen, they are highly trained to serve as a cavalry unit even to this day. More info here See Also

Camels

Do you know that camels are also serving in armies in some parts of the world. Indian Border security foces uses camels for their desert border patrols.

Strategy.

the only exclusive advantage of dragons, compared to humans, is their long lives

Humans live a long time. Probably humans live a long time because having some old ones around helped the tribe. They remembered things that were helpful.

Experienced individuals are still helpful today. Yes you can look stuff up but a written account does not do justice to the nuances of exactly how things went down and what happened next. Sometimes people don't write down the mistakes and the embarrassing stuff. Which is often the most important stuff, and dragons remember all of that. Dragons pay close attention and remember in detail; especially the details that meant they did not get killed. Many humans also appreciate those details.

Dragons are used as strategists. And sometimes sent out as noncombatant observers, because that is how you pay close attention.

Urban Warfare.

Your dragons are no use in open-warfare with tanks and bombs and fighter jets. Well that's not entirely true. Some dragons are very talented tank/bomb/fighter jet pilots. But this is not common knowledge.

What is common knowledge is dragons are urban combat specialists. One or two dragons gives an infantry platoon a huge increase in versatility. Here are the things the platoon doesn't need anymore

1. Medic and medical kits.

2. Aircraft for reconnaissance

   (note dragons are silent compared to helicopters. Bonus points if they have night vision.)

3. Aircraft for emergency evacuation (max one soldier)

4. Smoke grenades.

5. Tear Gas.

6. Battering ram.

The aircraft seems like the most important. For a lot of operations you do not need an entire helicopter. One or two dragons is fine. This cuts down on costs and lets the platoon move much faster. By extension platoons can be moved around and repurposed much faster.

Tactics

Dragons are resistant to rifle rounds. But if your opponent has anything more powerful (like a grenade) then dragons are not an automatic win. They must be deployed with tactics.

Once common move is to pin down the enemy position and have the dragons flank from behind. Once they get into breath range, complete chaos ensues, the enemy formation breaks, they flee, and you shoot them all.

This is better than flanking with humans because it is (a) harder to accidentally shoot your own guys and (b) forgivable if you do.

Indoors

Dragons are just about small enough to fit through a doorway if necessary. Indoors dragons have a big advantage over soldiers because they don't have to be careful to not shoot each other. On the other hand, a group of soldiers that splits in two needs to be aware of where the other half is, in case you suddenly turn a corner and accidentally open fire on your friends. Dragons don't have this problem since they are immune to each others' breath weapons. So they can just roam about with no coordination and be completely unpredictable.

Question:

Would some of the breath nanites be considered chemical weapons and hence be considered a war crime?