I tried so many times to get him to listen to me out in that big field; I even got my tallest character on a horse to give him The Shroud -- he refused to take it. I was severely depressed

I finished the castle ruins and saved dosoto (sp?) He said go to the dragon and say the word "elseramavin" then give him the wrap item. Anyways he won't listen to me whem I try to talk to him when he's flying. So I figure I gotta go to that cave up north. there is the depostitory where you put the ladies letter, then you go farther there is a bad ass dragon thing breathing fire at me. How do i get past this guy? and am I in the propper area? Thanks!

To pass this guy you have to get the dragon armor. It is in Stoud Mines. So, have a nice trip

Igor is right - stout mines first then boogre caves. You are on the right track - the dragon will only talk to you when it is siting on its' pile of treasure - at any other time you are just some plaything for his fire snorting amusement.