The dragons weren't just in the Withered Heath, that's just 'whence came the Great Worms'. Seems to be their original home in those mountains. The dwarves must have had settlements all around the Grey Mountains that were destroyed by the great beasts. Gundabad is only a stone's throw (or a dragons breath) away from the western edge of the Grey Mountains.
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As Beren looked into her eyes within the shadows of her hair,
The trembling starlight of the skies he saw there mirrored shimmering.
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