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This is an awesome story about the importance of the story. Yes, the moral lesson of "The Neverending Story" is the importance of the story itself (and by extension the importance of human imagination). If one has read some of Joseph Campbell's "The Power of Myth" one understands this completely. It is that Native American idea of "he who does not have the stories has nothing."
The key force of destruction in this tale is "the Nothing" literally non-existence or the lack of imagination. The world in which "The Neverending Story" takes place, Fantasia, is a conglomerate universe composed of the dreams and hopes of all people. Every story ever told and every character who has ever lived exists somewhere in Fantasia. So that somewhere in Fantasia, Paul Atreides wanders a desert landscape while somewhere else in Fantasia Alice falls down the rabbit hole.
Fantasia, this conglomerate world of human dreams, is dying. The reason is that people in the real world no longer dream... of anything. It is a very modern tale about the death of the human capacity to, as John Lennon put it, IMAGINE. Without the capability to imagine anything, people become easily manipulated by forces greater than them... this is where the real villain comes in (more about that after the next paragraph).
The main protagonist, Atreyu, is the alter ego of the real life boy who is reading the story. The real life boy, therefore, is filled with imagination, brimming with it, in fact. He exists in a real world where nobody imagines anything anymore. Therefore, the alter ego (in Fantasia) of the real life boy with imagination is a young champion who is trying to save imagination itself and its conglomerate world, Fantasia.
The real villain of the story is, at least from a Christian context, Lucifer, or the Devil himself. He is the "force behind the Nothing" who is attempting the death of all imagination. This explains the creature known as the Morg. As Sir Adam mentioned in his review, this is the major adversary for Atreyu (and the real life boy who is his generator). The Morg is, in his own words, "a servant of the force behind the Nothing." The Morg is, I believe, a demon, or fallen angel servant who has somehow crossed the border into Fantasia and put on the guise of that mythical creature of destruction, the werewolf. The Wolf image is only a guise used by the demon to try to blend in with his surroundings.
Of course, we know who wins in the end. This is a very complex movie and a VERY relevant one to the times in which we are living. I see people around me who are quite literally mental cripples who are incapable of imagination. Without the stories, we are nothing.
Looking at this film through older, more cynical, world-weary eyes, it's easy to discount it and point out its many faults. YES, the acting is unbearable at times. YES, the last twenty minutes are overly preachy. And YES the narrative progresses aimlessly with no rhyme or reason. But you know what? I don't care. I even found myself getting teary-eyed at some points, something I rarely do.
I agree with the other reviewers. If you didn't see and love this film as a kid, you won't enjoy it now. I watched the DVD with my (now ex) girlfriend, who yawned and groaned and rolled her eyes throughout the whole thing. A shame, really. I felt like she missed the boat. If this movie captured you as a kid, you owe it to yourself to let it capture you again.
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