Well, Percy might be really confused at first. If Milner is some sort of mystery figure, Percy could be on guard. Maybe he thinks Milner is a threat from another mythological realm. He'd probably have his sword ready just in case.
I'm not sure of a specific fanfiction where Percy Jackson finds Milner. You could try searching on fanfiction websites like Archive of Our Own or FanFiction.net. Use the search terms 'Percy Jackson' and 'Milner' to see if there are any relevant stories.
His first reaction might be shock. Dragons aren't exactly common in his world, even with all the mythical creatures. But then his hero instincts would kick in. He could try to befriend the dragon, thinking it could be an ally in future battles against the Titans or other enemies. He might offer it some food, like a fish or something, to gain its trust.
In a fanfiction, there are no real limits. Percy could potentially lift Mjolnir if the writer decides to give him the qualities that would make him worthy in Norse terms. Maybe his loyalty to his friends, his courage in the face of danger, and his selfless acts could be seen as worthy traits. However, some fanfictions might also play with the idea that he can't lift it, but still has some sort of connection to it that leads to other interesting plot developments.
In such a fanfiction, Percy might initially be very confused. He's used to his own world of Greek mythology and suddenly coming across Thor's hammer, Mjolnir, would be quite a shock. He might try to pick it up out of curiosity, not realizing its significance at first. If he could lift it, which is a big if considering it's only meant for the worthy in Norse mythology, it could lead to some really interesting power dynamics. Maybe he'd gain some new abilities related to thunder and lightning, which would be a huge shift from his water - based powers.
In the fanfiction, it could be that the dragon is a guardian of some sort. Percy finding it could lead to a whole new adventure where he has to protect the dragon from other forces that want to use it for evil. Since Percy is a hero, he would definitely step up to the challenge.
Well, if Paul finds out in the fanfiction, he might be shocked at first. He could react in different ways depending on what he finds out exactly. Maybe he discovers Percy's true identity as a demigod. He might try to protect Sally more, or he could be scared and want to distance himself from the whole situation.
One possible fanfiction could be 'The Unseen Pain'. In this story, Percy might be crying due to the overwhelming pressure of his demigod duties. Nico stumbles upon him in a secluded corner of Camp Half - Blood. Nico, initially hesitant, decides to approach Percy and offer his silent support.