The first half of the book, and the whole of the film, document the annihilation of the imagination as seen through the eyes of the inhabitants of Fantasia. Characters see the world they grew up in destroyed not by a passive nothing, but by an active howling hurricane of nothing, an aggressive void, stripping the land by force, leaving behind cold, raw emptiness.
In a last-ditch bid for attention, the child empress sends resident champion Atreyu on a pointless fetch quest designed to lure Bastian, the Earthling narrator (or narratee?), into caring about their plight.
A horse drowns. The child empress must have known this could happen. Artex dies not just to emotionally manipulate us the audience, but also Bastian, the real audience.
At the point where Bastian finally concedes that fantasy is real is the moment when he abandons the dusty, miserable, concrete reality that he endures, and departs into psychosis. Reality is that which persists when you stop thinking about it, Fantasia clearly does not meet that criteria. Bastian only cares about the fantasy because he feels empathy for the creatures in it which are being destroyed by him not believing in it. By believing in it he restores the world to as it was, but at the cost of him losing his ontological grounding in the world of bullies and maths tests.
When the credits roll, Bastian is mad.
The book continues with a second half in which Bastian and Atreyu go on a series of pointless adventures. There is no peril here because Bastian has a magic amulet to protect him and he can make infinite wishes. The only catch is that every time he wishes, he forgets something about the real world. The balance has tipped too far into the fantastical and we see the lure of power turns him into a despotic lunatic. Here Atreyu saves him by grounding him back in reality, which ultimately leads to Bastian returning to the real world. Balance is restored.
Maybe there is an optimum level of un-reality which is healthy for a person to have? Maybe the depressed have too little, and the manic too much? Maybe hope is a functional delusion? Maybe a foot in both worlds can keep the amnesia in balance.
And thus the closing moral of the Never Ending Story, is that we should strive towards 50% psychosis, no more, no less.
Stuart Bray 