Am a huge fan of this movie, and the book. I watched it as a kid, loved it, have rewatched it mutliple times and have enjoyed watching it with my own kids now, who loved it.
However, should not go in the Canon.
The problem is that it's not very well made. It's very enjoyable, very memorable, has some really good scenes, but ignores things like pacing and plot too easily. The main character is uninteresting, the luck dragon is awesome, but the CGI flying scenes really don't hold up (they could have done less to better effect right?), and the ending is unfulfilling even if it is enjoyable. My kids genuinely whooped with delight as they chased down those bullies. But as an end to the film it ties up nothing, it's a great scene, but not cohesive.
Putting aside the question of whether it's better than the book, or faithful to the book, I would ask a simple question. Could this film be better made then or now? I think the answer is yes on both counts. Its flaws don't make it better, they are flaws. So no canon for me.