I believe they retain the ability to drop rocks, but I don't have the book with me right now so I will clarify that tommorow, unless someone beats me to it.
yeah they still can. the skink rider does not drop the rocks but the terradon. and nothing is changed with the terradon when mounted by a chief.
pg 91 "Special rules Terradon: Flying cavalry, hit and run, drop rocks, arboreal predators." Why list a special rule the mount can't use?
A skink chief on a terradon is a unit by all means All single characters is to be threated as units as well.
For the above two reasons, I think its pretty clear that a Character riding a Terradon can Drop Rocks.