So your answer is that, because this is the only thing you could possibly imagine them doing with the Azem storyline, this must be what happens, even though nobody can put forward why it would be anything but a terrible idea on both a moral and narrative level.
I'm sorry, no. It would literally be more interesting to abandon the Azem story entirely than to do this.
Your entire storyline summary of Meracydia focuses on the dragons, but forgets that it's not a country of dragons. Allow me to summarize it:
-Five thousand years ago, it was host to three unique civilizations outside of the dragons: a centaur-like race that worshipped Zurvan, a rationalist society of multiple races that worshipped Sophia, and a race of tree people that didn't actually seem to worship anything until pushed to the grindstone by the Allagans and forced to summon Sephirot in self-defense.
-Allag failed to conquer it the first time, and had to come back centuries later with supertech to even have a chance
-In the present day, it's reported to be a wasteland... by sailors that can't even make landfall because of hostile locals, so what do they know?
-Thanks to Fandaniel, we did learn there was still a clan of dragons out there, and Tiamat's gone out to meet them. We can reasonably assume that the Warring Triad society's successors likely still exist too, five thousand years removed.
-Other scattered little pieces of info suggest Australian fauna, i.e. kangaroos. There's also some hints of Africa with stuff like the sphinxes in Azys Lla.
Just because you look at this and only think of the dragons, doesn't mean that the dragons are all we've got. Meracydia's actually roughly comparable to what we had of Tural pre-Dawntrail; with Tural we had the Mamool Ja, the Whalaqee, and that's about it, and they went off and made my favorite expansion out of that mystery zone. With Meracydia, we have one dragon, the vague specter of the Warring Triad's societies, and the overall vibe of 'Australia'; that's a hell of a lot of blank space to fill in.
I look at Meracydia and see a hell of a lot of potential for a story: not only do we have Tiamat as an exceptionally odd contact there, but the fact that the locals are so hostile raises interesting questions about how we handle in an adventure there; are the locals so desperate to handle a problem that they ask for outside help despite their own sensibilities, or are they so hostile that we have to prove ourselves to be cool to an entire goddamn Australia? Are they hostile out of general distrust of outsiders, or are they actually trying to protect something? Did Allag get knocked back the first time because Allag just sucked at naval warfare, or did they have a great secret that still lies there? And what about all the cool Australia stuff that's there? We saw Dawntrail make great stuff out of the Yucatan cenotes, the painted hills, and even a Texan desert, let's see what they can do with stuff like Uluru, or the Great Barrier Reef!
Also, forgive me, but I wanna see one of my favorite games do their version of my home country. I wanna see Meracydia in the same way I wanna see Pokemon do an Australian region, and I'm a lot more interested in that than 'let's go to the Fourth to commit cannibalism'.