Guess

We figured that attached to the main drive shaft was a spring that wound up. After that was a gear turned a gear behind that. The second gear was then attached to an axle. At either end were two disks with off-center pegs that, as they went around, shook the dragon's booty, thus providing a forward vector. The head, we figured, was attached to a vertical axle, which  had a flat disk with a universal joint off to one side. This U-joint had a rod, connecting to the drive gear with another off-center U-joint.

The Real Mechanism

The real mechanism for the legs was exactly how we had guessed. The head was close; there was a plastic piece with a peg pointing up that connected to the flat wheel, off-center. The man gear drove a small gear on an axle containing a little wheel with an off-center peg. That peg slid in a little slot in the plastic piece, pushing it back and forth, and then turning the head.