I'm pretty sure that the burning of the flame was a metaphor, that it's great power has a consiquence.
As for the Dragon God, it's not stated that the Dragon God is dead. Remember, FATE only split the Dragon God into 6 elements with the power of the flame, and Lavos probably was the cause for the split, as the Dragon God could not sustain all 6 elements of it's being. Hence they split up.
Them being part of the entity at the very end of the day is what probably kept them as quasi-dimensional beings. Every Dragon used their power to create Harle. The Dragons true power is left in Lavos. Besides that, they still have their elemental powers. Otherwise, just think about Harle.
Also, theres the fact that every Dragon has it's own personality. And Harle isn't under Lavos' control. The Dragons have their own goal.
Also, you can't really use the Sage of Marbule as a point because in one of the alternative endings where the Dragon God destroys all humans, the Sage of Marbule is there with it, Harle and Lynx in a type of celebration, or whatever that gathering was.
Also, it's not stated in game that Lavos warped the Dragon God. The only being that was warped by it was Schala, who was said to have been left only with her destructive side. But then, if it did apply to the Dragon God, then Harle wouldn't have compassion nor sadness, and we wouldn't have had that touching scene on the S.S Invincible.