I suspect that the interest all children have in the magical is connected to their spiritual development. Rather than fear and avoid the magical, we might use it to help the child develop a believing heart. Certainly in the minds of young children there is little difference between God, Santa Claus and Merlin the Magician. We can use the mythical to move toward the truly spiritual, helping our children understand the qualities in mythical figures that point us toward the source of all good, our Heavenly Father. The most important use of magical stories, in my opinion, is the empowerment of the child.
Fables are evil when they are used to discredit faith and destroy hope in the future.
Without a detailed explanation of these elements it is enough to say that the great tales of fantasy include magical elements, terrifying losses and obstacles, recovery and escapes, and a satisfying resolution through moral action. All of the great books I have listed include these elements, including Harry Potter . In each volume, Harry and his friends face seemingly insurmountable obstacles and emerge victorious. Though Voldemort may rise again, Harry and his friends will be ready for him, and so will we. It is this resolution which, in my opinion, justifies the presence of evil elements in the tale.