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This article contains plot details.
Short after the Year of the Dragon, the dragons are celebrating. This time of year is a rite of passage for the young dragons as they are getting their dragonflies. Also during this celebration is the Grand Dragon Parade. However, the celebration is interrupted by the arrival of Ripto, Crush, and Gulp.
Ripto casts a spell, intending on capturing the dragonflies which would weaken the young dragons. However, his spell misfires and the dragonflies are scattered throughout the Dragon Realms. He doesn't realize this, however, until he gets back to his lair. Once Crush tells Ripto this, he kills both Crush and Gulp in a fit of rage (However, this is only revealed after more than half of the dragonflies are collected.).
It fall to Spyro and Sparx to rescue the dragonflies. After capturing all of them, their combined magic is used to open a portal to where Ripto is. After a long battle, Ripto is once again defeated. It is then revealed that since Ripto is a dinosaur, he can't properly use magic, leading him to become jealous of the dragons and wishing to wipe them out. Ripto is then banished once more.
The game was originally going to be about Gnasty Gnorc teaming up with Ripto (as hinted at in the third game's epilogue) and stealing all of the dragonflies. There was supposed to be 120 dragonflies to collect, more than 25 levels, a constant 60 fps, and fast loading times. However, Universal forced the developers to rush for a winter release in 2002. This caused the game to suffer from long load times, graphical glitches, inconsistent framerate, sound issues, and lock-ups. Also, Gnasty Gnorc is only mentioned in the intro, there are only nine levels and one hub world, and only 90 dragonflies to collect. Two characters, Bianca and Moneybags, only appear once in the game before disappearing.
The game received mixed to negative reviews from critics.