>>2033Lum the Forever's script is very messy, but the story is mostly straight forward and you can think of it as "Lum meets an Old One".
The tree holds the seal on a yokai that drains the lifeforce (seemingly the most important figure in town) to feed itself. By killing the tree, they unknowingly unleash this being and continues to grow until an Oni princess was able to calm it and a new tree planted to contain it. Only that it led to her eventual death.
The story in the present is a repeat of the cycle, and
Lum fufills the role of village elder and the Oni princess, so she gets her life force drained and is going to calm the being leading to her death. The being is initially an egg, then a fetus, and it seems very child like and wants a mother figure, only being child like it doesn't know limits and seems to kill its mother figure.
Have you played Demon's Souls (2009)? It's another HP Lovecraft inspired story, where a vastly powerful being can shape reality, but it's child like and it needs a mother to lull it to sleep to calm its vast power.
The being wants Lum to itself, so it tries to erase people's memories of Lum. Then after lum is drained, it starts sapping on Ten. The tree grows powerful enough that it starts producing a fog that when breathed in connects the dreaming person to the tree's power and manifests their dreams as reality.
Mendo figures this out and starts a war of the Zaibatsus to force everyone to wish that things went back to normal and to destroy the manifested dream worlds in the cross fire. It's hare brained but kinda works?
Ataru simply wishes for normalcy as well and jogs like Lum used to job. When he falls asleep and connects with the being he wishes for Lum back. The fetus like being finally understands, that Lum belongs to Ataru and the rest of the world, and relinquishes her and goes back to sleep. Presumably another tree will be planted on it to seal it.