Dialogue, monologue, and small talk are all important. Without each being clear and concise, your characters will be the most 2-D things this side of the Milky Way. These are the ways you can see the character THINK, you know. Without them, the character is literally reduced to a brainless caricature.
Now, I know I said that you normally don’t want to use clichés, but this is one of the more important times to use them. Still, exercise caution. You don’t want to borrow too much, but there are several well-known expressions that aren’t taboo in writing parlance to use.
That being said, the most important thing to recognize when crafting dialogue is to know the character of, well…your character! If your character is a pirate, then he won’t say things like: “I don’t think that’s a good idea.” Write that, and you’re toast. Instead, intelligently, write something along the lines of: “Arrgg, ye dog! What blasted spray ‘o salt water put that scurvy idea in yer head?!” Notice, the pirate is more forceful in his declarations. Some characters don’t make “suggestions”, they make assertions. Notice who your character is, what he or she is prone to say, and then have them say it. The goal is to keep the character in character.
Secondly, dialect is key. Like the pirate example, there are many different but distinctly characteristic accents and according spellings that accompany some people. Cowboys are prone to say “ain’t” and “sceered” instead of “scared”, “yer” instead of “your”, “this here” or “that there” and so on. If your character is more fantastical, try to create a dialect that is specific to that person or group of people that person belongs to. E.g., the dwarf people of Northsummit have a tendency to mispronounce the vowel “e” always as the long, vowel sound. So where someone would say “debt”, they would say “deebt”, and instead of “red”, “reed”, and so on. See? Such things can add massive character to your story!
There’s always the boring English part of writing dialogue that I have to mention, so I will do so quickly and simply. In the sentence, “‘We can’t cross the river now,’ Molly said. ‘It’s just too dangerous.'”, that is the correct formatting. But if you should choose to put a period instead of a comma after “now”, then no one will heckle you. It looks almost the same. When writing dialogue, The colon and the comma are interchangeable when it comes to matters of “Timothy said, ‘…”. So please, keep this in mind. There are readers out there to whom matters of how dialogue is written matter very much. A final tip: when the next person starts talking, immediately whip out a new paragraph and matching indent. Too many thoughts on one string quickly become boring.
The not-so-boring English bit: You may have been told by your English teachers to “NEVER USE EXCLAMATION POINTS!” It’s a good policy, to be honest. At least in narration, refrain from exclamation points for the most part. But in dialogue, whenever a character is SHOUTING LIKE I AM NOW, be sure to use an exclamation point. Practice turning heard-sentences into written-sentences. If the written sentence is not grammatical, that’s of little consequence.
A good rule of thumb for writing dialogue: Learn from other writers. Reading helps writing. If you like the way this writer communicated this or that, take your cues from him or her. Reading is the best way to help with writing.
Monologue is much the same way. I try to avoid this, and cash it in as a form of internal dialogue. Just make monologue more personal, revealing insights and secrets about the character who is monologuing. Still stay true to their character, though. Even though there may be no other characters listening to the monologue.
Creation Challenge: Visualize a dragon-humanoid race in your head. What do they sound like? Are they soft-spoken or harsh-worded? Wise or stupid? Why are they this way? Do they have odd pronunciations? What do they think of the pronunciations of outside societies?
Good luck, and happy writing!