I've never owned or handled a Dragonfly - one of the reasons is the back end of the handle. The curves and angles strike me as odd. I'm sure the handle is super-ergo, but it's not visually appealing. Also, I love my Delica and didn't see the need to go down to a smaller size.
Anyway, VG-10 is probably a good step up. AUS works, but most people probably won't go out of their way for a knife made out it.
To keep the same price point, a redesigned pattern on a FRN handle would be nice. A color change to dark navy would be fairly conservative, yet still more interesting than black.
As far as fancy handle material, I think micarta would be the way to go. It looks great, is elegant on a small knife, and fills a bit of a gap in the Spyderco handle lineup. Then again, maybe micarta isn't all that common because the micarta sprints don't sell well.
How about stabilized wood materials? A natural grain would look great. Striped Dymondwood would be crazy. But I have no clue about shaping and strength issues with these materials.
Final crazy idea - some sort of stylized pivot. A jewel would look dumb on a $40 knife with a FRN handle, but perhaps you could make a die that patterns the pivot when you press-fit the knife together. It'd be different, and (maybe?) not all that expensive.
By the way.....I just looked at a picture of the dragonfly to refresh my memory.....the awesome blade shape may overcome my handle qualms. I think I need to do some shopping!!!
