For realistic head movement, the cursor position shouldn't dictate the position. It should dictate a force or direction to which the head can aim over time. For realism, the dragon's head should be combined with a simulated or pre-animated idle motion, such as an occasional swaying motion. This can be achieved by blending animations and skinning using the combined armature animation matrix palette.
Still, here's a demo of the test mesh/armature working with direct position coordinates controlled by the mouse (using bezier-based IK):
Just for kicks, here's how the traditional IK tracks an interactively-moving point. It looks pretty smooth, perhaps smoother than the IK, but as constraints have not been implemented, it cannot be used to realistically model the dragon's head.
The lack of rotation also rears its head, and the mesh appears squashed.