Is there any reason to keep basic dragons around?
Do I need to keep the basic, single element dragons (Plant, Fire, Earth, etc) around?
I'm particularly looking at the Earth dragons here, who have small habitats and slow earning potential. Do I need them to breed other dragons, or do the become quickly obsolete. Is there any other reason to keep them, other than looks?
I believe there is a trophy for having all dragons at once, and they are more likely to make the breeding combo you want. Other than that, they are there for whatever tiny amount of money they give.
If you don't need them for breeding immediately you could sell them and wait until you get better (large) habitats for that type of dragon. You can buy them again when you need them, but no sense in losing your only pure Earth if you're going to have to buy another one soon.
Generally I'm willing to lose the quick-hatching dragons like Plant and Lightning, but remember Earth dragons take forever to hatch. Since you get one extra habitat every level, after level 10 it's really no big deal to keep just one of every basic type, but there's no reason to keep more than one.
I try to always keep one of each dragon around in the Hibernation Cave you can unlock at level 14. Immediate access to these dragons can help when there's a limited time dragon you want to breed NOW, that way there's no re-hatching dragons before you can start breeding.
You should keep TWO of every dragon type either in habitats or in hibernation cave. I put the low earners in the cave but bring them out so I can breed two of them at once when trying to make new dragons. Look at the dodo dragon! Need two earths on the go at once for THAT sucker. And of course you want to breed two dodos anyway! :-)
Single element dragons are handy to keep around for breeding purposes, but I would not leave the at level 1. Unfortunately this does mean you should also keep a single Earth dragon around which are very poor earners as well as slow to breed/hatch.. After you have gotten all the earth combination dragons you could want I can see no reason to keep the original around, except that maybe I have gotten used to his big slow lumbering self in the middle of my vale :)