[Nimrothiel]

Alright, here's my viewpoint:

Morgoth couldn't create anything by himself, but he and the other Valar/Valier created ME through song with the unknown guidance of Eru. However, Aule created the dwarves, and Yavanna the two trees. Therefore, would Morgoth not have some power to create a form of life? Then too, it is said that when he began his own song to drown out the music of the other Valar/Valier, some voices became attuned to his. Assuming that said voices were Maiar; perhaps he later caused their spirits to inhabit the bodies of the great dragons, and then used some form of genetics to create the lesser dragons. Stem cells, that sort of thing; only he could create a clone with an individual personality and physical characteristics.