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Flygon should be in either Dragon or Monster along with Bug
Dragon: It is a dragon. Enough said
Monster: Well, a giant dragon/bug DOES seem like a monster to mealthough this would make Flygon one SEXY monster
The egg groups as they are make very little sense... bats and pterodactyls get slapped in with all the birds, while penguins and chickens are somehow not able to interbreed with other birds... and of course there's the whole "whales can breed with both fish and kittens" thing.
So it's kind of hard to suggest any changes other than "throw it all out and start over."