Interesting to me is that the story is layered with commentary about fatherhood and how it relates to the realities of family life, children and war. The film shows the fantastic, the magic of the world, as an antidote to a harsh reality. The Fantastic is an option we can choose. We can choose to take delight in the world and all its wonders, or we can choose to get bogged down by that harsh reality.
Angus, the lonely boy, had a father that led him to the natural world, explaining the awe of natural wonders to him when he was smaller. The father spent quality time with the boy and forged a strong relationship with him. His subsequent death in a ship sunk during World War II led Angus to a fantasy world. Literally, Angus refuses to acknowledge his father's death. But also figuratively, as their bond of an interest in nature leads the boy to discover the egg of the Water Horse, a faerie spirit of Scotland.
Angus' delight in the magical creature occurs around the events of the real world, as the armed forces move in to the estate Angus' mother is watching over. This brings in the first personality to vie for the role of Angus' father figure: a captain in the army, who is living in his own fantasy - he has been sent to guard the lochs of Scotland because there is a good probability no one will be coming to invade by that route. War is his life, but he really knows nothing of real war. Angus' mother is attracted to him because he is a man of position.
The second personality to vie for Angus' attention is Mowbray, an honorable ex-soldier, tired of the violence that has left him scarred, but aware that in service to a cause, sometimes it is necessary. He is a balanced figure, interested in the real world but aware that the Fantastic holds a better way of life at its core. It is stories that make life interesting and can show us a better way to carry on.
Because he refuses to accept his real Father's death, Angus rejects both of these men. The foolish captain tries to impress him with war. Mowbray probably reminds him too much of his real father at first. But when everyone is confronted with the reality of the Water Horse, honesty and true feelings are released. The mystery of things unkown, which are the very same things we want to know and often suspect, are the mysteries that prove to be cathartic when we are able to look at them correctly.
An interesting further look can be made with the Fantastic and the issues of Parents and Fatherhood. Harry Potter lives in a closet under his mean aunt's stairwell, his parents both killed. Lyra of The Golden Compass lives at a great institute under the care of the staff , her father pretending to be her uncle. The Pevensie's of Narnia fame have been shipped off to a country estate by their mother. We can even add Frodo to the list - Bilbo is his mentor, but is his uncle. Where are these British kid's parents?
It seems one of the more common themes in our big fantasy movies is the missing parent. But they all discover the awe of the fantastic only after being on their own. Is the Fantastic a good metaphor for the teaching of children, a substitute for guidance that cannot be found at home?