See Rambam Hilchot Ishus 6.11
התנה על האשה בשעת קידושין או בשעת גירושין: שתבעל לאביה ולאחיה או לבנה
וכיוצא בזה הרי זה כמי שהתנה עליה שתעלה לרקיע או שתרד לתהום ותנאו בטל.
שאין בידה שיעברו אחרים ויבאו על הערוה, ונמצא שהתנה עמה בדבר שאין בידה
לקיימו. וכן כל כיוצא בזה.
If a man made a condition to his wife during betrothal or divorce that
she should have relations with he father or her brother or her son it
is like he made a condition with her that she should fly to the sky or
descend to the depths of the sea and his condition is null. Since she
cannot force others to do a prohibited act so he has made a condition
concerning a matter which is not in her hands to fulfill.
It is clear from the Rambam that this halachah does not apply in the space age since the woman may now fly to the sky (and hitch a ride in a submarine). Therefore the condition is valid, the dragon may be slayed and the maid may be saved.
Points 2 and 3
According to the Rambam, a tam that killed a ben chorin is patur, this is possibly because ein damim le'ben chorin. Similarly here, since the dragon is sentient and also possibly Jewish (point 3), it has the din of a ben chorin. The knight is obviously a tam since he would have been killed in his previous dragon killing attempts, were he to have attempted them. Therefore the knight is patur mi'tashlumin.
Regarding whether or not the knight is crazy for approaching a dragon, the question seems to be, do we measure da'as absolutely or relatively.
That means, let's say you have a society where everyone is crazy, like the USA in 2021, so should you say that no-one is a bar da'as, since they are all crazy, or should you say that everyone is a bar da'as, because le'shitasam they are all sane. So since it is trendy in some places for knights to approach dragons, the knight is not considered meshugger for wanting to do so.
Lichorah this is toleh on the machlokess in the mishna in Shabbat 6.4
לֹא יֵצֵא הָאִישׁ לֹא בְסַיִף, וְלֹא בְקֶשֶׁת, וְלֹא בִתְרִיס, וְלֹא
בְאַלָּה, וְלֹא בְרֹמַח. וְאִם יָצָא, חַיָּב חַטָּאת. רַבִּי
אֱלִיעֶזֶר אוֹמֵר, תַּכְשִׁיטִין הֵן לוֹ. וַחֲכָמִים אוֹמְרִים, אֵינָן
אֶלָּא לִגְנַאי, שֶׁנֶּאֱמַר (ישעיה ב) וְכִתְּתוּ חַרְבוֹתָם לְאִתִּים
וַחֲנִיתוֹתֵיהֶם לְמַזְמֵרוֹת, לֹא יִשָּׂא גּוֹי אֶל גּוֹי חֶרֶב וְלֹא
יִלְמְדוּ עוֹד מִלְחָמָה. בִּירִית, טְהוֹרָה, וְיוֹצְאִין בָּהּ
בְּשַׁבָּת. כְּבָלִים, טְמֵאִין, וְאֵין יוֹצְאִין בָּהֶם בְּשַׁבָּת:
Just as it is prohibited for a woman to carry out certain items unique
to a woman into the public domain, the Sages said that a man may
neither go out on Shabbat with a sword, nor with a bow, nor with a
shield [teris], nor with an alla, nor with a spear. And if he
unwittingly went out with one of these weapons to the public domain he
is liable to bring a sin-offering. Rabbi Eliezer says: These weapons
are ornaments for him; just as a man is permitted to go out into the
public domain with other ornaments, he is permitted to go out with
weapons. And the Rabbis say: They are nothing other than reprehensible
and in the future they will be eliminated, as it is written: “And they
shall beat their swords into plowshares and their spears into pruning
hooks; nation will not raise sword against nation, neither will they
learn war anymore” (Isaiah 2:4).
Rabbi Eliezer is of the opinion that we follow popular opinion and people today think carrying weapons is cool. The chachamim follow the absolute position and since from an absolute perspective carrying weapons is uncool therefore it is prohibited on Shabbat.
Therefore according to Rabbi Eliezer the knight is sane and can betroth said damsel, whereas according to the chachamim the knight is insane and his kiddushin is not chal.