Ouch. I like the imagery of the item itself, but the power itself is a bit "meh". It's basically an instant-death rod, with the added side effect of being unable to resurrect the person afterwards without great difficulty. Though I will say that the soul-shard undead could make for a fairly interesting lot, if played correctly.
Just an idea, but if I were to use these I would make the wand tear the soul from the mortal and manifest it as a sort of physical object -- perhaps a crystal or a glass globe. The attacker could then do with the soul what he wishes. He could shatter it into a hundred pieces and scatter them to the four corners of the world (good backstory for a campaign), or he could simply be a sicko who collects souls and keeps them in a room somewhere. Maybe he fancies himself to be a sort of god -- perhaps he even has a cult following whose souls he "harvests".
Two quick questions: can Oraki change their skin/hair coloring at will? You make it sound like they can when you said that the females "favor" pastels, but didn't explicitly mention it elsewhere. Second, I understand that they are supposedly a merging of man and machine, as envisioned by Dr. Orak & heirs. How exactly did the spark of consciousness pass to them? Were there human "test subjects" involved in their creation?
Wins my patented (R) Smashing-Sub-of-theDay Award. Have an HoH.
Just . . . wow. My soft spot for dragons might be messing with my judgement here, but really, who wouldn't want a dragon as their friend? The only concern I have is that, once the dragonlings are a bit older, they become formidable companions. It's a lot of power to grant an adventuring party, especially early in their careers.
Some ways to offset this:
General prejudice of the population against the dragon-friends. They might have a hard time finding work after this.
Weapons with anti-dragon powers now work equally well against PCs.
Perhaps only allow one or two dragonlings to survive, to be cared for by the whole party rather than by each member. If the party ever splits, expect custody disputes to ensue.
These are rather small nitpicks to an otherwise excellent submission. Have an HoH!