I like the idea. These are my opinions, and may not reflect some of the seasoned professionals here on the forum.
1. Yes it is possible to make it look new again. It would just be gone over again with new ink.
2. Probably, but with as small as the dragons would have to be, it wouldn’t allow for alot of detail to them.
3. This decision will be mostly yours. Both would look well, but with already having a touch of color in the original ink, Prehaps just subtle little hints of color to each dragon would be nice.