Water Horse
Legend of the Deep
(2007)

The movie opens with a young apparently American couple in Scotland looking at the famous grainy picture of the Loch Ness "Monster".  An older man at a table says yes the picture is a fake and he knows it for a fact.  Then he tells this story:

During WWII a young boy Angus finds a magic egg at the shore of Loch Ness, hatches it and inside is the Waterhorse.  Angus raises the Waterhorse until it is too big to be in the house in the toilet/tub (both) and he and the handyman Lewis take the Waterhorse (he names it Crusoe) to the Loch.  Lewis is also the one that tells Angus that only one Waterhorse can be in the world at a time, that when the Waterhorse grows old and ill it lays one egg.  Then the Waterhorse dies before the egg hatches. 

The British army is there protecting the Loch from German Subs with large artillery guns.  They fire the guns in the Loch and make Crusoe "become wild".  He tries to then eat (yes eat) Angus when Lewis takes Angus to the Loch so he can tell Crusoe to "hide better". 

Some army enlisted persons hunt Crusoe and Crusoe torpedos the ship (get CG effects of the Waterhorse jumping and flipping).  Angus falls in the water and starts to drown but Crusoe remembers him and saves him.  Angus' mother comes up and finally believes the Waterhorse exists.  Angus jumps on Crusoe and they head out to sea. 

The Army on the cliff start to fire on Crusoe and Angus thinking he is a German sub.  Touching scene of Angus telling Crusoe goodbye and to get away.  Crusoe jumps the Sub Net at the cliff that is blocking his way. 

Now back at the pub the older man thanks the young couple for listening and says Angus never sees Crusoe again.  They ask his name--Of course it is Angus. 

You now see a blonde woman on the street yelling for her son William.  William is on the shore where he finds---come on guess--yep-  a waterhorse egg.  Seems that Crusoe is now dead and has laid an egg.

Thanks VH!