I've been trying to get some solid info on the power ups by watching the memory. So far this is what I've got:

Memory Locations for stats during play:

Current HP 05E7 (set to 60 for max HP always)
Armor 05F3 (setting this above 6A is bad. 6B freezes, higher resets the game when taking damage. It's AD&D, so lower is better. Setting it lower than 53 will also reset the game when taking damage.)
Current Speed 05F4 (Checks N of XN hex values. F is slowest, E is fastest but C-E moves too fast to turn and glitches the map after a while.)
Power Level 05F5 (0-3, or 11-13 with diamond. Values outside the X0-3 range change your attacks to enemy projectiles which do not hit enemies)
05F0 Orb Buff Timer: Mage Spells pass through you (including Stage 8 Boss).
05F1 Amulet Buff timer: Dragon Breath Attacks pass through you.
05F2 Arrow Buff Timer: Arrows/Stones/etc pass through you.
05EF White Potion timer: Combines Orb/Amulet/Arrow buffs
05F6 is your breath attack cooldown timer. Forcing it to zero doesn't change overall fire speed though. Forcing it to anything > 0 you can't shoot at all.

Wing: +1 Speed. Blue Potion: +2 Speed. Can't get more than +3 total with Wings and Blue Potion.

Shield: Supposed to buff defense permanently, but it's bugged. It reads the AC memory location (05F3) but does not change it. I'm guessing since the game will crash or freeze if the value gets too high or low they just made it a static stat for each dragon that can't be changed in-game.

Blue Heart: Heals 1-11 HP (randomly determined when spawned)

Red Potion: Heals 7-17HP (randomly determined when spawned. May heal more but never saw any heals over 17 or less than 7)

Red Heart: Heals HP to Max

Diamond: +1 Breath Power Level until hit

Arrow: Arrows/Catapults/Etc will pass through you while active (Red Aura)

Orb: Magic (Including from Stage 8 boss) will pass through you while active (Blue Aura)

Amulet: Dragon Breath (Including Dragon Queen's) will pass through you while active (Yellow Aura)

White Potion: Combines effects of Arrow, Orb, and Amulet buffs while active (White Aura)

Other memory locations I could figure out:

05ED = toggles 00 or 01. 00 when you're low to the ground, 01 normal height. Didn't test extensively, but 03 you're flying sideways and can't get hurt but it's hard to hit enemies with your attacks.
05E6 = Dragon Type. 10 = Bronze, 11 = Silver, 12 = Gold. Changing this during play will immediately change the breath weapon but the sprite won't until you take damage. Other values make your attacks miss enemies with varying sprites and each has its own dragon color using what seems to be enemy pallets.
05E8 = direction you're flying from x0 flying right CCW to xB

06FA: Setting this to 00 makes Kraken, Wizard, Citadel, Bone Dragon, Efreeti, and Space Head Man Guy thing... all die in one hit.
06FB: Setting this to 00 makes it so you can't leave a boss room.
06FC: Setting this to 00 you skip bosses and castles immediately.

I was trying to find a "Power" stat since each color has a breath power scale (the B), but it seems it's more to reference how generally useful it is. Gold has a TON of projectiles, Silver gets a lot, and Bronze has so few it seems to take nearly twice a long to beat most bosses with him.

Excellent work! I really wanted to do more with this game, like beating with the other colors so you can skip levels but I seem to have some attention problems lol

Yeaaah... I was trying to get through it and this was the result of my brain wondering, "What do these power-ups actually do?"