I think a lot of the time it works on immersion as much as suspension. As @Iris-Grimoire says there's a lot to be said for looking the part, for instance by all reasonably calculations your standard dragon would also need a far bigger and bulkier wingspan and that's without going into fire breathing, but because it looks proportionate, it can slide. And on the aesthetic and context side, although slightly further from the topic, there's the well known fact about Jurassic Park's raptors, that they were aware raptors aren't 6ft and they were being pretty inaccurate but they wanted to make them scary and because of the context everything worked. You didn't really care how accurate they were, I'm sure a lot of the audience wouldn't have cared what they were called, they just did the job of the scary smart pack hunter.
As a general rule, the audience will suspend disbelief as far and as much as you want them to. What keeps disbelief suspended is immersion and internal consistency. You can tell the audience the world works however you please and they will go with it as long as it's pretty consistent. Why do dragons breath fire? Because they do. Because it's consistent. Which is why many people arguing against recent Star Wars had the lightspeed issue of "if you can just jump into another ship and wreck it like that why hasn't it come up before? why don't people do it with drones or clones or whatever?" (I don't care enough to fall on either side of the argument for the record this is just what they say) and that is where consistency and not thinking through internal logic or just wanting something big and flashy starts to undermine suspension of disbelief.
Another massive issue is stupidity without reason beyond "to make the MC look good". Pick an amateur detective, any amateur detective. Now look at their law enforcement foil who insists on jumping to conclusions, never listens no matter how many crimes the MC has helped them solve and is just generally dumb and nasty. That is the sort of character who makes wonder how this world actual works (and how many innocent people are in jail and how many murderers wandering free in this world?) because who can such an incompetent person be in a position of power for so long (unless that's the point).
Basically, suspension of disbelief will go as far as the authors efforts. (Also I know it's their job to pick things apart so take it with a pinch of salt but cinemasins on youtube is actually a fantastic resource for common things that can pull people out of the story. Most common seems to be "how did they survive that?")