The plot revolves around Buddy, a human who grows up with elves at the North Pole after crawling into Santa’s bag as a baby. When it is, at some point, no longer deniable that he’s not actually an uncommonly tall and clumsy elf, he travels to Earth to find his biological father. That man, played by James Caan (who for some reason is tied to Buddy’s adoptive elf father, played by Bob Newhart with a completely different temperament, by a similar vocal affectation), works at children’s book publisher, but seems unsuited for the job. He comes across as profit-obsessed to the point of cutting corners because children wouldn’t notice anyway. He’s also a workaholic, though with nothing to show for it, leading to tensions both at home and at work. Initially, he doesn’t want anything to do with Buddy, whom he disbelieves and whom he has removed from his office by security. The audience is clearly meant to root against him here, but really, that’s a reasonable reaction to a crazy story by an apparent crazy person.
Buddy, who spends much of the film wearing a ridiculous green-and-yellow outfit and whose relentlessly cheerful and pleasant attitude has been imparted on him by the elves, does little but behave like an idiot through most of the movie, constantly misunderstanding things despite supposedly having the intelligence of a grown man, which inexplicably endears him almost instantly to his father’s wife and teenage son as well as to an “elf” working at a department store’s Santa shift (Zooey Deschanel, almost unrecognizable with blonde hair if not for her voice). Ferrell’s hyperactive man-child routine for once is fitting for this character, and he is admittedly good at pratfalls. But even his presence can’t keep the character from grating after a certain point, since there’s no variation at all and it becomes very, very old at the latest after the half-way mark.
—Some (predictable) spoilers travelled below from the North—
There also aren’t any lasting consequences to his behaviour. On the contrary, his “innocence” is lauded in bringing about a change in his father’s attitude. Buddy almost loses his father his job (supposedly a bad thing, but not if you think about it, since the guy is comically terrible at it), and then his younger half-brother actually does (as if shaming your father into getting fired so you can both look for a grown man was the better choice). Much like the father, the script takes too many shortcuts, giving the character progression too little weight and the central protagonist none at all. It’s almost offensive in its bland inoffensiveness (except for a handful of grown-up gags towards the end that seem to belong in a different, better movie more confident with absurdity, like the violent Central Park Rangers and an extended satire on local TV news). So the emotional pay-off, in which not just the father, but all of New York re-learns appreciating the spirit of Christmas, helping Santa deliver his presents, ultimately doesn’t feel earned at all. Maybe it would have if there was snow outside the window? Who knows.
(A 2014 television special reviewed in the AV Club article linked to above, incidentally, is also insubstantial fluff, if not a bit worse. It tries to tell more or less the same plot in half the time (less, probably, if you measure it from the Broadway musical it’s technically adapted from), which exacerbates the weightlessness of the live-action film. In comparison, it’s also even less subtle, with a clearer central villain and more direct pronouncements of how the characters feel. The songs are at most okay and unmemorable. At least the animation and voice acting, with an almost completely different cast, are serviceable.)