It is impossible to know in truth the origin of the
spirits that inhabited
Dragons, though it is certain they contained some fell spirit that animated what might actually be a forged body of sorts?
For I do not believe that this
Dragon is unconquerable, though he grows greater in strength and malice with the years. I know somewhat of him. His power is rather in the
evil spirit that dwells within him than in the might of his body, great though that be.
The Coming of Glaurung; Unfinished Tales
However, I find also an interesting reference from
the Silmarillion that refers to
Morgoth devising
creatures;
and
Men dwelt in darkness and were troubled by many evil things that Morgoth had devised in the days of his dominion: demons, and dragons, and misshapen beasts, and the unclean
Orcs that are mockeries of the Children of
Ilúvatar.
This leads me to wonder whether Dragons were creatures/creations inhabited by demons, fell spirits who may have been
Maiar, but seemingly could have been the souls of tortured
Elves and housed as Phantoms or Ghosts by
Sauron? Similarly the same could be said of those Wights that inhabited and animated the bones of the Barrows!
Whether then these had 'free will' in the sense that the Children of
Iluvatar had supposed 'free will', I suppose they did to a point! That point being that their will was subject to the dominion of their master, whom they served.
Morgoth used some of these for his evil purposes, and feigning to give them liberty sent them abroad, but their wills were chained to his, and they strayed only to come back to him again.
Of Elves who were captured by Morgoth it was ever known that they were bound to him, either by sorcery or fear. The same could be said of all those who served him, free will to go about their business, but always in his service. As someone pointed out earlier, it was Morgoths desire to rule the wills of others. This is significant as it means the gift of 'free-will' allowed by
Eru to his Children, this would be the ultimate abhorence. Also, possibly an indirect reference of Tolkiens disgust in relation to slavery as the greatest sin against Men, IMO.