If I'm not mistaken, that's the younger version of the Archmage. Plus, that's the good version of the giant centipede-dragon that's currently possessing someone. Based on what we've seen so far - with Eveline splitting and the two giant noodle dragons - I'd say that the Naga is the evil half of some sort of god, or something similar. It could be that it got split in half in some giant cataclysm, creating the Naga and her foot soldiers and the opposing force, whatever that may be. Now they're fighting for dominance or something similar.
Another option is that the Naga was somehow created to oppose the Force of Good, and then afterwards created opposite versions of the dragons in order to properly fight it in a good vs. evil style.
As for where this fits in... well, the white fade on the edges of the panel so far has only been used for memories, which means that if Vir is keeping consistent, this is a memory of some sort. So either this is a transition back to the Archmage for more FOXY FIGHTING, or the blue noodle dragon's memory, and we're going to have some sort of awakening scene for it, or it's just going to be reminiscing as it comes to join to fight. Either way, exciting!
