Apart from the technological problems of upgrading a fighter that is horrdendously expensive and was only produced in very small numbers of which almost all were destroyed a decade ago, the Dragon just doesn't have any advantages that make it worth the effort. Rather than quote a whole bunch of posts, I'll answer the points raised by others below.
Using fissions against capships: Erm, what evidence do we have that fissions would even make a dent in WC

's phase shielded capships? While fissions were powerfull against capships in WC4, so were dumbfires, which make no impact at all on WC

ships. Same for the charging mass drivers, which have a similar damage potential to fissions.
Using fissions against fighters: While being able to destroy an Arrow with one shot might be a buzz, it's also impractical. In the time it takes fissions to run to charge alone, an Excal or Vampire's main guns can shred a light fighter. That's to say nothing of the time it takes to line up a shot with the fissions or the time it would take to do it all over again if you miss with that one chance.
Infinite afterburn: Again, this is a cool feature, but of limited use. Seriously, folks, how many times have you run out AB fuel in an Excalibur or Vampire? I've played WC3 and WC

literally a dozen times, mostly on nightmare, and I can count those instances on one hand.
Cloaking against the Nephilim: I've seen people say that Confed could develop a cloak Mk 2, but this would be assuming that Confed would invest in both an upgraded Dragon and an upgraded cloak. That's like saying "If we had some ham, we could have ham and egss, if only we had some eggs." If Confed could indeed develop a new cloak, wouldn't make far more sense to put in an existing design that is familar to both pilots and has the resources to support it (such as the Excalibur or Vampire) rather than trying to drag a no longer produced design out of mothballs?
Torpedoes against capships: There are already fighters that can do this. Strike Vampire, anyone?
Bottom line with the Dragon in WC

times: Cloaking is useless, fission guns are much less practical than other weapons, infinite AB is of very little real use. Take all that way, and the only real advantage it has over the Vampire and Excal are its defenses. That's a poor substitute for the speed, agaility and firepower deficiencies it has compared to both the Excal and the Vampire.
Best, Raptor