Here is a rather long summary of how I believe the plot of Willow stood at the point when Moebius did his concept art:
Willow Ufgood, a diminutive Nelwyn, finds a human baby, Elora Danan, who is being pursued by the armies of the sorceress Bavmorda. To keep his village safe, Willow knows he must return the baby to the world of the humans. He sets out accompanied by his best friend Meegosh. The duo do not get far before they meet Mad Martigan (then so spelled), a great human swordsman who is currently in a position of dishonor. The idea of having Madmartigan imprisoned in a cage at a crossroads may already have existed.
At this point we are also introduced to Airk Thaughbaer, Mad Martigan’s old comrade-in-arms. Airk is riding with an army to confront the sorceress Bavmorda, who has just destroyed the great castle of Galladoorn, which belonged to Airk’s king.
After much debate, Willow and Meegosh free Mad Martigan, entrusting him with the baby, and begin to return home. However, they are kidnapped by trolls and imprisoned in their underground lair. The Nelwyns also see that the trolls have kidnapped Elora Danan.
Fortunately, the Nelwyns and Elora are rescued by two brownies, small water sprites who lead them to a waiting boat. The trolls pursue them in their own boats, and a dramatic river chase ensues.
At last the trolls lose the chase—possibly by being killed by sunlight when dawn breaks, or maybe via a flood of water summoned by the Brownie Elder, like that called up by Elrond to defeat the Black Riders in The Fellowship of the Ring.
The Nelwyns travel on to Brownie Island, where they are reunited with Mad Martigan. Here the Brownie Elder tells them that they must take Elora Danan to the benevolent sorceress Fin Raziel, who lives in a wasteland. She can lead them to the hidden Elf city of Tir Asleen, where Elora Danan will be safe.
The Brownie Elder gives three magic acorns to Willow, which will turn to stone whatever they are thrown at. In the third-revision script the fairy queen Cherlindrea, who replaced the Brownie Elder, gives them to Willow, but in the final film they are given to him by the Nelwyn village’s elder, the High Aldwin.
Mad Martigan and the Nelwyns set out on their journey with the child. Because the Brownies are water sprites, and they will be traveling overland, presumably they leave the Brownies behind. In the final film Meegosh would depart at this point, being replaced by two Brownies (who are no longer associated with water).
They stop briefly at an inn, where they are discovered by Bavmorda’s troops, led by Sorsha. Mad Martigan is struck by Sorsha’s beauty, but she demands he hand over the child. As in the finished film, a chase through the woods on horse-drawn carts and chariots ensues.
The heroes elude their pursuers, and finally reach the wasteland of Fin Raziel. Here there is nothing but barren sand and rock, except for one lone tree in the middle.
Mad Martigan recounts the legend that the tree in Fin Raziel’s dwelling place is made of solid gold. When they approach, Meegosh starts breaking off the branches of the tree, and discovers that while the exterior is covered in bark, the inner core is indeed golden. (I suspect that in this early version of the film, Meegosh was principally a comic-relief character. In the third-revision script, where the tree is still present but Meegosh is gone, Madmartigan takes over the role of the greedy branch-picker.)
Meanwhile, Willow notices a tree-dwelling creature nestled among the branches. It’s Fin Raziel! She explains that she was cursed by Bavmorda, and that they themselves are in dire danger. Meegosh continues to pile up branches… but then a monstrous two-headed dragon emerges from a cave beneath the roots of the tree!
The dragon incinerates the golden branches with its flaming breath. A battle ensues, and Mad Martigan kills it. Relieved, the heroes turn around… and find Sorsha and King Kael, Bavmorda’s lieutenant, at the head of an army there. Sorsha captures them and takes them with her.
If you’ve seen the final film, you may have noticed that I made no mention of Willow’s magic wand. That’s because early on there wasn’t one. In the early version, Fin Raziel told Willow that he needed to create a philosopher’s stone before he could do magic. This took the place of the magic wand; in fact, it actually survived as long as the third-revision script.
While Sorsha’s army is encamped, Willow manages to gather the ingredients and create the philosopher’s stone, which he uses to set himself and Mad Martigan free. He also transforms Fin Raziel into a bird, like in the final movie. Also as in the final film, Mad Martigan goes into Sorsha’s tent to rescue Elora Danan, but finds himself sidetracked by the sleeping Sorsha.
Apparently the concept artists—and not just Moebius, judging by other art on the film’s Blu-ray—imagined Sorsha as sleeping naked beneath fur sheets. She was given a nightgown in the final film, though.
Willow, Mad Martigan, and Meegosh manage to escape with the baby. I believe that at this early stage, their escape was on horseback, as opposed to the impromptu sled scene of the final film.
The heroes take refuge in an ominous-looking ruined castle—it’s Galladoorn! Bavmorda’s troops ride behind them in pursuit. However, our protagonists are sheltered by the remnants of Airk’s army, who are hiding in the ruins. King Kael’s army does a cursory search, but fails to find them.
Mad Martigan asks Airk and his soldiers to accompany them on the way to Tir Asleen. Airk refuses, believing that the Elven kingdom is a myth. Meanwhile, Willow has used his magic to restore twelve of the kingdom’s greatest knights, who were petrified by Bavmorda when the castle fell.
The knights, hearing Mad Martigan’s plea, agree to make the perilous journey with him. Not only that: they are so impressed by his courage that they decide to make him the new King. Wearing a shining suit of royal armor, Mad Martigan leads the party to the seashore, where they take ship in hopes of finding Tir Asleen. Meegosh, however, fearing for his life, would likely stay behind with Airk.
Fin Raziel flies overhead as a bird, guiding them on the right path. The way to Tir Asleen is guarded, however. A huge sea monster attacks the boat! Five of the knights are killed, but Willow turns the monster to stone with a magic acorn.
The boat arrives at Tir Asleen, and the heroes are taken to meet with the Elf King, Sorsha’s father. Mad Martigan pleads with him to send his army into the mortal realm and defeat Bavmorda, but the King refuses to get involved in human affairs.
Suddenly there is a commotion at the castle walls: Bavmorda’s army has followed the heroes to Tir Asleen, and is besieging the city!
During the chaos of the fight, Sorsha sees her father for the first time, and realizes the depth of Bavmorda’s evil. She switches sides, saving Mad Martigan’s life.
Willow uses his second magic acorn during the battle, but fails to affect the outcome. All seems lost—until Airk shows up with the remainder of his army—and Meegosh! Airk was shamed by Mad Martigan’s example, and followed Bavmorda’s soldiers to Tir Asleen.
Unfortunately, King Kael has managed to steal Elora Danan during the fighting. He rides back to Bavmorda’s fortress of Nockmaar with it. Willow and Meegosh, Mad Martigan and his men, Sorsha, Airk and his army, and the king of Tir Asleen with his knights, all follow.
As in the final film, Bavmorda turns the entire army (save Willow, who has protected himself using the magic of the philosopher’s stone) into pigs. At this point Willow performs his greatest act of sorcery yet, restoring Fin Raziel’s human shape so that she can undo Bavmorda’s curse.
I suspect that, with the character of Cherlindrea not existing yet, Fin Raziel would have been restored to the form of a young, beautiful woman, as she only supposes she is meant to be in the final film. When Cherlindrea was added, Fin Raziel may have been rewritten as more of a female-Gandalf character.
As in the final movie, Willow hatches a plan to deceive Bavmorda into opening the gates for the heroes’ army. They all charge in. King Kael attacks and kills Airk, but his death is avenged by Mad Martigan, who kills Kael immediately afterward. (Airk is an obvious stand-in for Tolkien's Theoden, who leads an army to relieve the siege of Gondor, but dies when the Witch-King attacks.)
Fin Raziel and Bavmorda have a magical battle, but it is Willow who defeats her using his sleight of hand. Elora Danan is saved and goodness restored.
In the ending scene we see Mad Martigan as the king of a beautifully restored Galladoorn, with Sorsha as his queen, and Fin Raziel and the Elf King at their sides. Willow is presented with a Book of Magic, and he and Meegosh return home to their village as heroes. The ending here would likely have referenced the rough draft of SW 1977, which in turn referenced that of The Hidden Fortress.