User blog comment:MerlinUSA/Lies My Dragon Told Me/@comment-5102537-20130130003215

The meaning of Kilgharrah's words in regard to what is and what is not refers to Merlin's doubt that Arthur will succeed in uniting Albion (and how ironical that Merlin was so right about it).

This is the dialogue:

MERLIN I don't see what this has to do with me.

KILGHARRAH Everything. Without you, Arthur will never succeed. Without you, there will be no Albion.

MERLIN No. No, you've got this wrong.

KILGHARRAH There is no right or wrong, only what is and what isn't.

This means that whether Merlin believes it or not, the prophecy is (supposed to be) clear about the fact that Merlin has to help Arthur in uniting the lands of Albion (which was made a mockery in the finale of the show).

When Kilgharrah told Merlin about the power of love he was clearly referring to Gwen breaking the spell when Arthur was enchanted. It was a love spell and only his one and only true love, Gwen, could break this spell. This was unmistakable. There was no mystery to it since a love spell is so powerful that only a stronger power can break it. Since Arthur's only true love was Gwen, she was able to break the spell with a kiss. Merlin understood that immediately.

Moreover, love doesn't necessarily have to be a quality of humans only. Since the dragon was undoubtly an intelligent and emotional life form he surely knows very well about the power of love.