Character Design: Constructing a Story behind the Characters Part 2 (Dragons and McGuffins))

Making up a story that can appeal to 12 year olds is harder than I thought. I've been having so many ideas and find it hard to let go of them but harder to combine them all together. So what I've got now is a mashup of ideas which don't make sense when being put together. I really want to get my story down so I can start doing all the creative work.
Phil suggested I should add some magic and fantasy to my story, which is obviously what attracts children. Thankfully, Chinese culture is full of Symbolism and Mythology I can work on. Also a McGuffin would be a good way to drive the story and give a purpose to the protagonist. I was thinking of linking some Chinese Mythical Creatures to the story, like Dragons.
I have the location and a back-story explaining the bond between Eastern and Western Culture (The Transcontinental Rail road Construction / Gold Rush during the mid 19th century). Now, I need a bit of Magic and explain the conflict between good guys and bad guys. Oh and of course try and link Kung Fu in the best possible way. This diagram explains all the different ides I had and their combinations. I hope it makes sense:

Possible McGuffins:

A medallion? 

A totem ?

Magical Dragons as part of the Story?