The dinosaurs did not even appear until the late Triassic. There were
no dinosaurs in the Permian
Yes -- I think the idea is that oxygen levels stayed low through at least
the earlier parts of the Triassic, encouraging the evolution of the
bird-style lung.
Are such lungs really worse at "processing fumes" than mammalian ones? I'd
think the opposite -- there's no dead air in a bird-type lung, so everything
that doesn't immediately glue itself to the tissue is swept out immediately,
no? The canary in the mine dies first simply because it's so small (and has
much higher metabolism than a lizard of the same size), I'd say -- note that
gases rather than aerosols are involved here.
The extinction scenario... I think it's supposed to work like this: First
the planet warms for unmentioned reasons. Then this stops the global ocean
circulation. This means that no more oxygen reaches the deep sea, so
anaerobic organisms prosper down there. Some of them make H2S, and this
bubbles out and kills everything.
Global temperatures and ocean circulation seem to have something to do with
each other -- witness the Oceanic Anoxic Events of the Mesozoic, especially
the ludicrously hot Cenomanian-Turonian boundary --, but I don't quite know
what that could be if there aren't any ice sheets available.