Almost all the backup stories are written by Larsen and they are worth a read but not critical to the main story. The last backup featuring Vanguard might be a bit confusing becasue it has been running for several issues.
Now, on to explaining the Dragons current status.
Dragon is actually from a non-violent race called the Krylans. They are roughly comparable to humans in strength and durability, except for their monarchs, who are The Chosen. Before he woke up naked in a burning lot Dragon was their Chosen, Emperor Kurr. He was also just a tiny bit nuts.
The Krylans were roaming the galaxy in search of a new home and when they discovered Earth Emperor Kurr decided it would be the perfect home for his people except for all those pesky humans. He decided to wipe out all human life on earth so his people could settle on it but a few of his scientists didn't agree with him. They got rid of him by blowing a hole in his head and filling it up with satellite transmissions from Earth while his brain healed, effectively wiping his memory. They then dumped him on Earth and continued on their merry way in search of an uninhabited world to settle. That's why Dragon woke up with no memory of who he was but actually knew just about everything about Earth.
Move forward many years and Dragon has another traumatic brain injury which results in him resuming the Emperor Kurr Persona after he has healed. He decides to continue where he left off and attempts to concur the world, killing thousands in the process. His supporting cast eventually find a way to get rid of the Kurr persona and restore the Dragon one but the damage has been done. Dragon turns himself in, goes on trial, and is sentenced to death.
Meanwhile, his race finds a planet to resettle but end up being attacked by a more advanced race and are completely wiped out except for a few. One of the survivors, a woman, goes back to Earth to enlist Dragons help in repopulating their race. The only problem is that if Dragon fathered all the new Krylans they would all be super-powered like him so he agrees to have his powers removed by the Krylan scientists who have devised a way to do so by changing his DNA.
So that's why Dragon is on death row without powers.
As for Malcolm...
He inherited his lightening powers from his Mother, Rapture, but he was hit by a dart containing "Freak Out" which turns Freaks back to normal. He didn't take the precaution of having some of his blood stored at the local hospital like his father did so they had to use Dragon Senior's blood to restore Malcolm's abilities, and since his lightening powers came from his Mom he was S.O.L.
Phew. I hope that is relatively coherent.