One of the robots in the Lanayru desert/mining facility. He's hiding inside a prison cell from a bokoblin, kill the bokoblin and talk to him. He'll upgrade your beetle and your ready to fly!
It is firstly upgraded into a 'hook beetle' by a robot which you have to free from a cage in Lanyuru desert which means you can carry things like pots or bombs. After that you have to go to gondo's scrap shop and use collectables and rupees to upgrade it to go faster and to travel longer distances.
in lanayru desert, you save an ancient robot and in thanks it will upgrade your beetle so it can hold and drop bombs. you can also go to the scrap shop in the bazaar in skyloft to upgrade your beetle so its faster and can withstand hitting surfaces better.
In faron woods, sometimes on 'walls' or trees. if you roll into trees, they may fall out.
you don't :(
you can find them in lanaryu desert
There are three dragons in skyward sword. The first is located in Lake Florana. You must, however, complete the silent realm challenge before you can find her. You can find the silent realm location with dowsing.
Game stop is where I got it
it is in the middile of the desert sea, and you have to use your dowsing ability to find it
Floating around skyloft is a giant floating hose thing with a bell attached to the bottom of it. hit the bell with a slingshot,arrow,or the flying beetle to have him drop the rope for you to climb up
You can find them in the silent realms or buy them from the moonlight merchant for 100 rupees.
Kill the mini boss on the Sandship
Go to the graveyard at night, and roll into the grave closest to the tree.