I'm not completely sure but I don't think he says anything about "dragon slaying", if I recall correctly he comments on countless demons/ghosts/enemies Guts has slain with it.
Vlad is right. He never said that. We have translations available, I suggest you check them before posting next time. That line translates as: "With that sword of yours, it's possible. It has been forged by the deaths of many hundred and thousands of malicious beings."
Did you ever consider that perhaps the Chinese translation was simply worded differently? You should really be asking for confirmation that it actually says that in the original Japanese, not hypothesizing based on a secondhand source.
Yes, Smith is aware that his Chinese translation is simply wrong on that point, I've already told him so privately. I think he wanted to post the picture so that it could be shown the actual Chinese translation is erroneous. Hopefully now we can lay this thread to rest.