There are at least two versions of Nutcracker Fantasy: a Japanese one and an English one. While both are about the same, the English one lacks a few shots deemed too intense for family viewing.
The opening scene is narrated by a woman telling us how when she was a little girl, she loved visiting her Uncle Drosselmeyer in the town of Mindon. She tells about his clockmaking and toymaking, and then about the Rag Man, a Mindon urban legend who turns children who don't go to bed on time into mice.
To be honest, I fail to see the point of the Rag Man sequence as it's such a tiny part of the entire story. He's referred to a few times in passing, and had an additional appearance in the Japanese version. The fact that the English version works without that bit proves just how well it would flow without him.
Anyway, Clara stays up to see Drosselmeyer home, despite the protests of her Aunt Gerda. Clara's old friend Fritz is coming to visit the next day. When warned about the Rag Man, Clara says she's too old to believe. When Drosselmeyer returns, he has an imperfect doll with him that resembles a nutcracker soldier. Clara likes it and wants to have it to sleep with. Drosselmeyer lets her, but that night, she dreams mice are carrying away the Nutcracker. Downstairs, a large two headed mouse queen named Morphia and her son refuse to return them. When a mouse scratches Clara, the Nutcracker comes to life to defend her. The mice flee, and Clara falls asleep again.
Clara awakes in her bed and can't find the Nutcracker. There is also a scratch on her arm. Aunt Gerda thinks she's feverish and sends for the doctor. As Clara thinks over the previous night, she finds herself downstairs and enters the clock, calling for Drosselmeyer. She eventually finds her way into a palace where she is mistaken for Princess Maria. When she reveals the mistake, they explain Princess Maria was placed in an enchanted sleep to slowly turn into a mouse by Morphia. This happened when a marriage proposal between Maria and Morphia's son Gar was refused as part of a peace treaty.
No one in the court seems to have any idea how to break the curse, but Clara is advised by a street singer to visit a gypsy who goes by "Queen of Time." The Queen of Time reveals the only way to break the curse is to break the Shell of Darkness, Morphia's source of power (it covers her heart), with a pearl sword she gives Clara. Clara then explains and gives the sword to Lieutenant Franz. The surprise attack on Morphia and the mice is successful, but just before the Nut of Darkness is destroyed and Morphia killed, Franz is cursed to become a Nutcracker.
Clara falls asleep and dreams of dancing with Franz, until finally they are about to go up a flight of stairs together. She gets stuck on a stair and Franz goes without her. She awakens to see Gar about to carry off the Nutcracker, wanting revenge for his mother. Clara protests, asking him to forgive Franz. She then offers her life for Franz. As Gar is about to stab the Nutcracker, Clara throws herself in front of the knife, but when it strikes her, Gar is destroyed, Franz is restored, and she finds herself falling into a black hole.
Clara awakens in her bed and Aunt Gerda announces Fritz has arrived. When he enters, he looks exactly like Franz. The two are reintroduced, and we are told they lived "Happily ever after." They are then seen surrounded by the people of Clara's fantasies.
The story is a loose adaptation, though the connections to the original Hoffman story may be seen. While many parts are rewritten, Clara now takes part in what was the Princess Pirlipat story. The battle between mice and toys is now part of that as well, and Clara's willingness to sacrifice for her love is also present. In short, while the story is very, very different, the important themes are there, in what makes for a sound story in its own way.
The weirdest thing to me is Clara's husband being named Fritz, who was her brother in the original story. ... Awkward.
The music is really good. If you listen closely, you'll note riffs off of Tchaikovsky often. Drosselemeyer's "Tick Tock Tee" plays with the classic March theme from the ballet. "Where Does The Blue Bird Fly" has the chorus take off the Final Waltz and Apotheosis.
However, I must say that the casting of Christopher Lee as Drosselmeyer, the Street Singer, the Puppeteer and the Watchmaker was genius. Pure perfection.
Lilies in the night
Move in shadow
Knocking on the door
Move in shadow
Knocking on the door
Somewhere in the dark
To dance a dream of fantasy
Palace of the princess
As she is sleeping
Clara, take my hand
Feel the music
Now the dance of the dolls has begun
And in the moonlight
In your first pirouet
This is dance of the dolls
And it's all for you...