The dragon was befriended and taught to use his firebreathing
abilities to create fireworks.  Many of the pages were black with
purple and orange fireworks.  There was a castle wall that he sat on
to do this? The book was in an elementary school library in a NY
suburban community.

Hello.

Your book was "The Dragon Who Like To Spit Fire" (1961) by Judy Varga.

A scan of the cover appears in this eBay listing.  The illustration is
exactly as you describe (i.e., black with purple and orange colors).
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&category=279&item=7918186922

A newsgroup message in which someone else was seeking the same book
was my first clue:

"I'm trying to track down a book I had as a child in the mid sixties. It was
about a little dragon who lived in a cave and could spit colored fire. He is
befriended by a prince and goes to live at the palace pretending to be a
dog... The little dragon saves the day and is allowed to come back to the
palace and put on a fireworks show every night."
http://groups.google.com/groups?q=dragon+group:rec.arts.books.childrens&hl=en&lr=&ie=UTF-8&group=rec.arts.books.childrens&c2coff=1&selm=91nv9o%24qb8%241%40nntp9.atl.mindspring.net&rnum=5

The involvement of the prince led me to this listing on Abebooks.com:

"Varga, Judy
THE DRAGON WHO LIKED TO SPIT FIRE...1961...
...The story of Darius the dragon and Prince Frederic."
http://dogbert.abebooks.com/servlet/BookDetailsPL?bi=141989468

When I saw the cover on eBay, I was certain that it was the book that
you were describing.  If it's not, please let me know via the "request
clarification" feature. Thanks.

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Clarification of Answer by juggler-ga on 24 Aug 2004 20:41 PDT

Sorry for that typo in the first sentence:

"... Liked ..."

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Request for Answer Clarification by scunge-ga on 24 Aug 2004 23:52 PDT

Oh my,  thank you so much.  That is exactly it,  you have no idea how
long I have been looking for this book.

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Clarification of Answer by juggler-ga on 25 Aug 2004 00:01 PDT

Wonderful!
Thank you for the tip.
-juggler

Absolutely dead on and so fast.  I am pleased and impressed.