POUR popcorn in extra large mixing bowl, discarding unpopped kernels; set aside. MICROWAVE caramel candies and butter in large microwave-safe bowl on HIGH power 30 to 60 seconds until caramels are softened. Add marshmallows; MICROWAVE on HIGH 1 to 1 1/2 minutes until marshmallows are puffed and doubled in size. Stir to blend. Pour over popcorn; stir until well coated.
GENEROUSLY SPRAY hands with nonstick spray. Shape popcorn into four 3-inch balls for body; one 5x1-inch log for neck; four smaller balls for tail. To form body, wrap each 3-inch ball in a separate sheet of plastic wrap. Place three wrapped 3-inch balls in a triangle on counter; tape to secure. Center the remaining wrapped 3-inch ball on top of the triangle; tape to secure. Wrap the log in plastic wrap; tape to the top ball. Stack two sheets of plastic wrap on counter. Wrap the four small balls in the plastic wrap. Press and tape one end of the plastic wrap under the balls; tape that end to the body. Twist the other end and tape to secure; fluff and trim ends; if desired.
DRAW head and wings on craft foam; cut and tape to neck and body. Twist two ends of chenille stems together. Shape into a scalloped pattern; tape to back of dragon.