That seems a confusing situation.
We've pretty much established that the rulers of the EWF spoke Auld
Wyrmish, and I hypothesise that the Empire had a common tongue of the local
Theyalan base language -heavily- influenced by Auld Wyrmish (which I've
called 'New Wyrmish')
So, I think the statement you are discussing may have been a mistake by the writer.
That is to say:
Rulers spoke Auld Wyrmish as a rule, however would of course be capable of
speaking the common (lesser draconic) version 'New Wyrmish', which is what
eventually survived as Old Pavic.
Even had the quote said something like "the folk of the EWF spoke a now extinct Theyalan dialect", this could be seen as a generalisation, since I seem to recollect that only a few hundred people speak Old Pavic, so its pretty much an extinct language in general terms
Another possibility is that the term 'rulers of Peloria' applied also to the supporting workers (clerical officers, minor nobles etc) who may well have still spoken the old local language (the Theyalan language from which Sartarite and Heortish sprang (I think?) and which influenced Auld Wyrmish. This language is indeed extinct
(listen to me, sounding like I know what I'm talking about, heh heh) :)
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