She looks like that specifically because she wanted to be what she thought would be the most attractive to the MC and the stone made he look like what she thought would entice him (the mc probably wouldn't have cared if she kept her skin and hair color, but well, you know how stories like this go)
I'm really curious but for those who've read the WN, does anything happen in the future to bring back the baby dragon? I know Hiel has its ashes in his necklace but does he maybe find another stone that lets him revive it from the ashes instead of bone, like the new dwarf guy who was a just a skeleton?