With a new character at the point of my execution where the axe man looms over me the dragon just circles and circles and circles. Reloading does nothing but saving, turning off the console and loading will continue the game.

i had the same thing happen to me..

http://www.youtube.com/watch?v=g4wBjAQV5P8&feature=plcp

same here

According the other forum goers, it's a vanilla game bug.