If we consider the natural side of things, creation can lead to overpopulation, oversaturation and a complete disruption of harmony. Controlled destruction allows the propagation of less obstructive specials and give them the opportunity to develop.
Okay, so for me, there are a few issues with the premise altogether. First, you have to be clear on what the Dragons create and why they are terraforming in the first place. If they have no other objective other than to create and destroy, then there isn't much of a driving force for them to go to war with each other especially since they were both created by one other superior race.
Perhaps you mean "biomes"? Biospheres are enclosed areas with a controlled environment whereas biomes are sections of land differentiated by climate, flora, and fauna. i.e. arctic biomes, desert biomes, etc. If they are in charge with creating these, the Dredge will need to show-up first to clear and prepare the area before the dragons can begin the "creation" part of the terraforming.
I would not consider including the creation of creatures to either race as there will be conflict on who should be in charge of which. For example, a carnivore is a natural factors used to control the population of herbivores, scavengers and bacteria help to reduce and decompose the leftover carcass and restore nutrients back to the soil which in turn is absorbed by the plants the herbivores eat. If only the dragons are allowed to create, then they in turn create these creatures too which defeats the purpose of the dredge. Although, you can consider that the conflict began because the dredge created these creatures to counteract the rampant growth of what the dragons created. You can set it so that the new creatures the dragons made are overtaking and taking over the native flora and fauna while the dredge, seeing the rapid change and the danger this can cause to the ecosystem created counter-agents to help the native flora and fauna propagate.
Now, another thing to consider is the resources the dragons require to "create". For example, considering the idea of biospheres and what they are, they require a considerable amount of resources to create and maintain. You can consider that it was (in the olden times) the dredge harvested the resources (logging, mining, quarrying, excavation etc.) to which case they were considered of lower standing to the dragons who create. (FYI this will give a deeper aspect to the name since to dredge is to clean out or to dig) although the name is cool, this will give the readers a reason to sympathize with the race despite being assigned to destruction in contrast to the proud and lofty dragons.
Anyway, just my two cents on the ways you can bring out the potential in your idea.
Good luck!