Managing a resource is a fun addition to a "Dig Dug' type game. Adds another little layer of strategy.
Although in Dig Dug you press the action button a few times to inflate and explode the enemies (what a brutal sounding death in a cartoony arcade game!), and that is a bit of extra fun added to the action. If the fire breath was a meter or gauge and you can hold the button to continuously breath fire. Maybe it gets longer, or has an initial higher startup cost, but cheaper to maintain. I'm just now imagining an implementation where you utilize the tunnels created and breath a big blast that can be channeled farther through a narrow tunnel or set of passageways.
Softlocking the game by running out of fire breaths before roasting all the knights feels bad. Likely lack of dev time due to the jam constraints or what not. Being able to gain more breaths mid-level, through a pickup or something, might feel like it lessens the strategy element of managing what you started with. Of course the boulders are another option, but those stupids knights must be drunk just stumblin' around at random. Makes it frustrating to line up a hit. A secondary attack could be cool. The dragon might devour a knight, but only from behind, and you lose some gold due to digestion!
Had fun during and after playing! Great work, keep at it!