I didn't recall them making much progress. What I got was that they had not made much of a dent at all, that Icefyre was so big that the best efforts were ineffectual. His head would not fit through a door, after all.
I hadn't read that last bit, but it makes sense that a limb joint would have less protection than directly over the vitals. At the least, the scales near the joints would need to move and be more flexible. As for the new dragons, that was what I got, also that they might be retarded or crippled or something. I didn't read past Fool's Fate, but what I recall of the commentary on the dragons' situation was that they were born or hatched in a weaker state than normal, and less able to fend for themselves. That was the significance of Icefyre, that the pre-existing larvae were not going to suffice to bring back the species, and that Tintaglia needed a mate to breed proper and healthy dragons.

I got into Hobb for the Assassin trilogy, and wasn't thrilled by the places the story went in the next trilogy. I didn't know the Liveship trilogy was connected until references in Tawny Man made it obvious there was something else going on there, so I went back and read it, but I didn't like the setting or new story stuff, and there weren't any characters I particularly cared for. Even Amber, even knowing her true identity, since the Fool was never an element of the Farseer books in which I had much interest, either as a character or plot device.

I don't like how the term "Mary Sue" is overused, not to mention misused, but the Fool and the dragon aspects seem to be one of those authorial favorites, in which the writer is far more fascinated than this particular reader.