Got another rude version (credit to a chap called Michael Bye)

Puff the magic dragon *anks down by me he shaves his bollocks in the autumn mist and pisses in the sea Hoy!

Think the original goes something like....

puff the magic dragon lived by the sea and frolicked in the autumn mist in a land called honolee,

Little Jackie paper loved that rascal puff, and brought him rings and sealing wax and other fancy stuff.

Dragons live forever, but not so little boys, Paper, strings and (something) rings make way for other toys,

One grey night it happened, jackie paper came no more, And puff that might dragon he released a fearful roar.

(You can see why people get the urge to do rude versions.)