This is cleaned up from a chat log with krinndnz. I posted something similar in comments on lupagreenwolf's journal some weeks back*, and since then I've kept meaning to expand my thoughts on the subject.
Krinn: Which of these statements more closely reflects your state of mind: "I am literally a dragon" or "Being a dragon is such a useful method of understanding/coping with/narrativizing the world that I've heavily integrated it into my life"?
Baxil: Um ... mu?
It's not that both are true so much as that it's a false dichotomy. I do literally believe myself to be a dragon. At the same time, the only reason for me to acknowledge it in the first place is since the knowledge aids me in some way.
In my more self-subversive moments -- and, hell, let's make this one of them -- I'd lean more toward the second. Only because:
Even if I didn't literally believe I was a dragon, I'd recognize its utility as a metanarrative. But if I didn't recognize its utility as a metanarrative, I wouldn't bother with the idea of being a literal dragon.
They do stack on each other more than is immediately apparent.
The idea of being Otherkin -- to me -- fundamentally relies on the notion of making a conscious choice of belief. Even if there is an objective reality and the nature of that objective reality is that in an essential way I am draconic ... my choosing to accept that identity, as a guy in a human body, involves a set of conscious decisions about the way in which I view the world.
It's easy to say "I believe this because it's true" - but in this context, 'true' means 'viewing the world through this lens makes things look more correct.' Which is inherently subjective.
Short of someday physically turning into a dragon, the best I'll get is a framework that makes more sense as a meta-narrative than ($alternative). ... And to get around to the original question, if draconity caused my world to cohere more badly, it just ... wouldn't occur to me to insist on it. The ultimate goal is a meta-narrative that makes sense.
* Edited to add: Link to original post, which is worth reading beyond my discussion. (It builds off of an earlier discussion of Otherkin as metaphor here.)