Start by sketching on paper the shape of your dragon's head, it helps to have something to work from.  Then start to create the shape of the head by creating linked spline curves.   Create the curves by creating a series of points in one view following the outline shape of the head (for this model I used the side profile).  Select the points in order and create a curve.  Create the side profile from three curves, where the curves cross or connect they should share the same points in order for the patch to work later.
Next create extra curves running vertically and horizontally across the head.  Now it is time to add some dimensions to the head shape.  Select the curves one at a time, then using drag points pull the points into position for the top view.  Continue to add curves until you have a shape you are happy with.  Note you only need to create one half of the dragon's head as you can simply mirror it to create the other half.
When creating curves you should keep in mind that you will have to select areas enclosed by three or four curves to be patched to create the final model.  See in the image below, how I have created several short curves instead of one long one in certain places.  This is to make the selecting of selected areas easier, if your selected curves bound more than one area lightwave will only be able to patch one of them, making it difficult to build the model.

Each patch must have its bounding curves selected in clockwise order either three or four curves.  Once the curves are selected use the patch function to create the patch.   Use a patch division suitable for your model, I used ten for the example below.   Try to use the same patch division for every patch so you can merge them together later.  After you make each patch, select one of it's polys the press ] to select the rest of the patch, now cut the patch from the current layer and past it to a new one.   Repeat this procedure for the rest of the patches, cutting and pasting all the patches onto the same layer.

Once you have all the patches together (remember you only need to model half of the face as it can be mirrored to create the other half) perform a point merge to join all the patches together.  As long as you created all the patches with the same division you should end up with a perfect smooth mesh of half a dragon's head.  All you need to do now is mirror it and perform another point merge

The image above shows the final patched model.  The nostrils have been created separately and joined to the head using boolean union.  The lips have also been added, they are simply a disk extruded along a curved path.
The image below is the untextured version of my final model, note the extra details which have been added for more interest.
All the horns and ridge scales were created using a simple box shape which was metanurbed into the final shape and joined to the model using boolean union.  Some of the boolean functions left some messy joins which needed cleaning up by hand.  The horns protruding from the chin had extra polys built around then to create a lump for them to grow out of.

Now it's time to texture.  To create the scales for the head I needed a template of the head to work with.  This is easy if you are using Windows simply hit the Print Scrn button when you have the view you want in the modeller, this will copy the screen to memory.  Then switch to your preferred paint program and paste the clipboard into a new image.
Voila, one ready made head template.  To off I usually adjust the brightness and contrast of the image until I have a black and white image of the wire mesh.  Next I will use photoshop to add a new layer and begin to paint in the details for my image map.   The main map I need for the scales is a bump map so I created a greyscale image with all the scales in place as shown below.  This can take quite a long time but the end results are worth it.  I had initially tried various procedural textures for the scales, but none of them worked as well as an image map.  I also created a colour map and a diffuse map from the same base image.

  The actual texture map I used was 900 pixels across, generally the bigger the image map the better, although you must take into account the amount of memory they will take during render time.  As you can see I also created an image map for the fins.
Other images were used also.  One for the eyes, notice the veins, the long horns have a bumps and diffuse map to make them appear ridged, and the nose horn has a diffuse texture on to create a sort of dirty bone effect.
The background image was taken from the Inside Lightwave tutorial CD.