Honestly, The Au Ra would only be threatened by the ishgarudians because of their "Half-Dragon" look. Thus probably why Yugiri is in desgise currently. But rememember as well, Au Ra are from Othard, an Othard may verry well have dragons of it's own and, assuming there are, inevitably some were evil and needed to be killed too.

Vut with the Au Ra' apperence, it's really no diffrent from the Miqo'te when you think about it. Miqo'te are cat people, but do we acuse them of being Couruel sympathisers? No because it's a beast and a Miqo'te is a person. Litteraly the only exception would be Ishgaurd and we're only one more patch away from kicking in The Gates of Judgment and setting The Archbishop's happy wagon streight any way. So what Ishgaurd thinks about them will probably be irrelevent as I'm not sure the Archbishop or his crusaid either one will survive into the Heaven's ward expantion. After all the winds of change are already stiring in Courthas thanks to us.