All great heroic tales and mythical legends need a great monster or monsters to work. From Jason and the Argonauts and The Clash of the Titans, to Lord of the Rings: The Fellowship of the Ring and Harry Potter and the Sorcerer's Stone, anywhere from one to several villainous creatures must pose a threat or challenge to the mythic heroic figure in order to create tension and drama. In the tale of Beowulf and his battle to become a king, the reader is introduced to a number of these 'wretched' beasts, the strange and tortured Grendel, Grendel's nameless and wordless mother, and the prophetic dragon who serves as guardian and keeper of a hoard of ancient and virtually worthless treasure. Both the epic poem Beowulf and John Gardner's Grendel present the dragon in both attractive and dangerous terms, but it is Gardner's version of the dragon which gives the reader a more intimate portrait of the dragon as the corrupter and serpent entity.
In Beowulf, the dragon is awakened by an intruding slave-thief and retaliates by showering fire and chaos upon the lands of Beowulf's kingdom. " … the fire-dragon had raised the coastal region and reduced forts and earthworks to dust and ashes," - Narrator [159 (2333)] Despite these horrific deeds the dragon is regarded with respect and fear and seen as one of God's creatures, a luxury not afforded to either Grendel or to Grendel's mother. " … what occurs on the wall between the two of us will turn out as fate, overseer of men, decides." - Beowulf [171 (2525)]
It is interesting that the dragon should be seen as one of God's creatures and for serving a purpose in the larger scheme of things despite his terrible violence and action. Wasn't the angel, Lucifer, after all, one of God's creatures before he fell? This is the transformation and aspect of the dragon that the reader encounters in Gardner's work. This creature of discord is manipulative, clever, and magnificent. The dragon of this tale is far more conversational and familiar. Unlike the dragon in Beowulf, a creature of very few words " His words were few" - Narrator [153 (2246)], Gardner's dragon makes a game of breaking and subsequently corrupting Grendel. "Why is it fiddlesticks if I stop giving people heart attacks over nothing?" Grendel asks after the dragon advises him to go ahead and frighten the villagers. "Why shouldn't one change one's ways, improve one's character?" - Grendel  "You improve them, my boy! Can't you see that yourself? You stimulate them! You make them think and scheme. You drive them to poetry, science, religion, all that makes them what they are for as long as they last.", "If man's the irrelevance that interest you, stick with him! Scare him to glory! It's all the same in the end, matter and motion, simple or complex. No difference, finally. Death, transfiguration. Ashes to ashes and slime to slime, amen." - the dragon 
In the epic poem Beowulf, the dragon is merely a guardian of the old treasure, resolved to settle down with his pile of gems and gold and to sleep. Though it is subtly brought to the reader's attention that the dragon creature represents doom and evil in the poem (only evil and wretched things need wait until nightfall to attack), he serves mostly a passive role waiting for his turn to defend his life in a battle which he already know will result in his death. " ... the burning one who hunts out barrows, the slick-skinned dragon, threatening the night sky with streamers of fire. People on the farms are in dread of him." - the Narrator [ 155 (2273)] "He rippled down the rock, writhing with anger when he saw the footprints of the prowler who had stolen too close to his dreaming head." - the Narrator [155 (2288)] As the last of his line, he has nothing to look forward to but dreams. "My own people have been ruined in war; one by one they went down to death, looked their last on sweet life in the hall. I am left with nobody to bear a sword or burnish plated goblets, put a sheen on the cup." - the dragon [153 (2249)] Is it any surprise that given that amount of free time, he might come up with clever ways to amuse himself, as the dragon in Grendel does? In this case, making a falling angel out of Grendel. "I felt as if I were tumbling down into it - dropping endlessly down through a soundless void. He let me fall, down and down toward a black sun and spiders, though he knew I was beginning to die. Nothing could have been more disinterested: serpent to the core." - Grendel 
Gardner appears to have given the dragon a more vital and participatory role in the end of an era. Instead of the passive and sleeping dragon of the epic poem, Gardner's dragon is an entity that permeates evil and inevitable destruction throughout the veins of the tale. His philosophical waxing, though pompous and flippant, echoes and resonates throughout the story in Gardner's version. "A swirl in the stream of time. A temporary gathering of bits, a few random dust specks, so to speak - pure metaphor, you understand - then by chance a vast floating cloud of dust specks, an expanding universe. Complexities: green dust as well as the regular kind. Purple dust. Gold. Additional refinements: sensitive dust, copulating dust, worshipful dust!" - the dragon [70-71] In other words, everything falls apart and/or ends. This is the fatalist outlook of life the dragon tells Grendel we live until we meet an apocalyptic end. "Such is the end of the flicker of time, the brief, hot fuse of events and ideas set off, accidentally, and snuffed out, accidentally, by man. Not a real ending of course, nor even a beginning. Mere ripple in Time's stream." - the dragon 
In the epic poem Beowulf, we have the dragon as guardian and hint of evil to come. In John Gardner's Grendel, he takes on a much more ominous and momentous role. Not only does he represent the challenge, which will, through its own destruction, bring an end to one of the 'ripples in Time's stream.' but also he gives us several questions to think about regarding our own existence. Grendel takes us further into the lair of the dragon to show what sorts of devastation can arise with corrupted thinking, while simultaneously poking fun at the simplicity and fragility of human nature. He uses the dragon as a metaphor for Satan, and instead of making the story about a great hero who dies at the hands of a beast, he makes it a story about an insecure creature who seeks in the wrong place for advice and dies at the hands of a beast. That dragon has Grendel's blood on his claws for certain. I believe that Gardner's work urges us to seek out answers in our lives instead of glory, because ultimately even glory fades and now is the only thing that's real.