The manual is wrong, the Dragon's Breath button will never do identifying.The first thing you need to do is train in the artifacts skill when you level.
When you view items that character has, there'll be another selection for that item.. that selection being identify (mixed in with group, drop, read, all those fun things).
1. join the priest's guild - a one time fee of $500.
2. enter the guild, and train your character in the ancient lore trait.
3. level up to the next level.
4. go back to the priest's guild, and train your character in the identify item skill.
5. level up to the next level.after fulfilling all of these requirements, your character should be able to right click on an unidentified item in his or her inventory and choose identify item. depending on your skill level, you may or may not successfully identify the item.
jason
ps - if anyone disagrees with the above, please set me straight!