Yeah, Decoy is completely different from Dodge.
Dodge avoids damage from the time it is cast until it ends at the end of the next round.
Your example is actually:
Mechanical Pandaren Dragonling uses Decoy
Legendary Boss Pet hits the Decoy, removing one of the two charges
Mechanical Pandaren Dragonling uses Thunderbolt
Legendary Boss Pet hits the Decoy, removing the other charge
Mechanical Pandaren Dragonling uses Breath
Legendary Boss Pet hits.
Decoy blocks two “attacks”, but lasts until it has absorbed two attacks. If the opponent doesn’t attack - for example, if he heals, or shields, or passes - the Decoy still stays, for however long, until it has blocked the two attacks.
Now, what is an “attack”? Um.
This has been much discussed. Blizzard’s coding is, er, idiosyncratic.
Obviously, a simple normal attack like Crush or Surge is one attack. That’s OK.
But what about, say, Alpha Strike, that hits twice if you are faster. Is that two attacks, for the purpose of Decoy? Well, er, no. Even if you are faster, Alpha Strike will remove only one of the two charges of Decoy.
But Flurry will remove one charge of Decoy for each hit it makes. Flurry hits one or two times, and an extra time if you are faster. And each hit of Flurry will remove one charge of Decoy. If your MPD is facing my Rabbit, and my Rabbit is faster, and you drop a Decoy, it will happen at the end of the round, because you are slower. OK.
Now, at the start of the new round, if I attack with Flurry, and it hits twice, it will remove both of your charges of Decoy. If it hits three times, it will remove both of your charges of Decoy, and then hit your MPD with its last hit.
That’s just the way they wrote it. There is no meaningful or logical way to know whether a multi-hit attack will remove one charge of Decoy per hit, or one charge for all the hits together. You just have to remember which moves do what.
In PvP, we often talk about having a “Decoy-breaker” on your team, a multo-hit attack that counts for two hits on a Decoy, when there are a lot of Decoys (usually from MPDs) in the queue, so you can cancel a Decoy in one round instead of wasting two.