The Wayfarer's Inn

Essentially, Dragons have their own 'kingdom'. While CM1 presented the Wyrmsteeth range as nominally part of Norwold, and later products like DotE maintained that, theres no-way that a population of 600-900 dragons in a mountain range are going to be agreeing that they owe fealty to anyone.

Wyrmsteeth dragons would range far and wide across the world. They're powerful, but they don't want to be unsettling any one nation too much. Scouts from there would pick appropriate raiding targets and places for settling, also non-Wyrmsteeth dragons ready for mating within a radius of thousands of miles. By raiding far and wide they would effectively mask their true numbers.

Dragons further afield... Thing is, to be a huge dragon you've had to survive a while, and according to Heards articles you've had to raise and maintain quite a horde too. So you don't want to be closely involved in human politics; in fact, except for bungling adventurers coming along as juicy snacks they'd probably like to keep as low a profile as possible. Once in a while a great old wyrm will make an arse of himself (I'm thinking Incendarious in CM2, Korbundar in CM2, etc.) but that doesn't increase their life expectancy at all, odds are some 'hero' or other will turn up and try to kill them.

On the other hand, younger hatchling dragons (small dragons) would be far more common. They may have to travel a greater distance to find lairs, they may be forced closer to human communities, and they're probably far more greedy to start off their own hordes. So encounters with these troublesome youngsters should be quite common; a 'dragonslayer' might be someone who goes around dispatching the young and inexperienced dragons, but it takes a real hero (read, high level adventuring party) to deal with the biggies when they turn nasty.

So I rekon that an uneasy truce exists betwee the great old dragons and powerful humans; while humans who go out to kill dragons will be dealt with sooner or later, and while excess youngsters and oldsters gone bad will be battled by powerful adventurers, for the most part I see dragons and humans (and demi-humans) leaving each other well alone. To go out and hunt down the great dragons who aren't causing harm would upset that balance, and incur the wrath of both sides.

So, ultimately, while huge dragons should be rare, I'll be there are more of them than you might imagine...

About smaller dragons: That makes sense. Also they are probably inexperienced and tend to underestimate humans.

Also the "we give each other some breathing space" (pun intended ) mentality you propose for the older and powerful dragons gives them a tone of mystery.
"This is the western village in the County; you'll see no sign of civilization western from here for days. Lizardmen inhabit the swamps, orcs and ogres the hills and goblins roam in the plains... who lives in the mountain? *chuckle* If you cross the lands and travel towards the west for 3 days and 3 nights you'll reach the mountain. In the top it is said to be the lair of a mythical creature, large as a castle, breathing fire that molts rocks and master of dark magic. The dragon sleeps in a cave full of gleaming silver and gold. That dragon is the mother of the smaller dragons that plague that area; like Firedoom the dragon slayed by Rodgan the brave 4 years ago... no, I don't know her name. If you think that the dragons you have met are tough, you better avoid her. "