First off good job actually completing a game with menus and a tutorial that's a major point that I overlooked when making my game.
The main issues that I think are holding back this games fun factor are the collision just being kind of buggy so I die when it looks like I'm not getting hit and stuff like that. The need to spam the space key is pretty bothersome. And the enemies seemingly all behaving exactly the same kind of gives the game a repetitive feel on top of the already buggy stuff. Also I wish dying didn't send you back to the start of the level and it was more like Ikaruga where you just hop right back in and keep progressing but that's more of a personal preference I suppose.
The limitation is used well there are 3 different upgrades and they all seem good in their own right so good job there. I think having them as random pickups instead of a scripted choice between the three isn't the best way to go about it cause then there's no decision to be made the best course of action is just pick up every upgrade. But besides that I think the overall game design is good.
I think the visuals and sound are pretty good on their own, the dragon is nice looking the pixel ships have a great look but it all kind of clashes together and isn't super cohesive. There's some nice death effects in the form of explosions which are good feedback but I think more could have been done in the sound department. Sound effects for ships exploding and such. I liked the music that played throughout the game so no complaints there.
Overall the core design is fine and has a solid idea the execution is just a little messy. Thanks so much for creating and sharing!