If I click "Save and continue" -- should it publish the post?
ETA
Yes it published it. And only afterwards the drop-down list with an option "Drafts for XiXiDu" appeared.
ETA #2
This is a bug, don't punish people with downvotes for publishing their unfinished drafts.
People don't expect their draft to be published when they click "Save and continue" if there is a "Submit" button.
The real problem is that if you "Create new article" from the main section, you have all three options- LW main, LW discussion, and draft. If you "Create new article" from discussion, the only option (as you point out) is posting it to Discussion. Just fixing that should be sufficient to have people posting unfinished articles to drafts.