I started my project off by trying a new design transfer method - quilter's mesh. I picked some up recently at a clearance store for very cheap and it seems like a neat option. Here is the mesh and the dragon template I downloaded.
I traced the template using a Sharpie permanent marker and it traced pretty easily.
Here is what the mesh looks like with our cute little dragon drawn on.
I have a nice Micron pen that I use for embroidery, but the tip is small and too stiff to work well with the mesh. The mesh holes have just enough depth to snag the pen tip a little, over and over. Instead I went with the Sharpie felt tip and it worked really well. When you lift the mesh up, you get a nice little dotted line to trace.
Here is the design with all the dots connected and the lines smoothed out a bit. My little dragon is ready for stitching!