Once upon a time, Geraldine Brennan stepped off the path to trace a route through the sometimes dark world of the traditional yarn

The Iron Man looked happy. When a child climbed a ladder to hand him a bouquet, his headlamp eyes flashed and his brain fizzed sparks of approval.

The mighty, 20ft, scrap-metal sculpture is possibly the best-humoured bouncer to be found in Tyneside on a rainy night (not difficult). He’s on the door at Newcastle Arts Centre during the third exhibition staged by the Centre for the Children’s Book. There’s been no trouble yet.

The figure was made for a Young Vic adaptation of Ted Hughes’s folktale in 1993 and donated to the centre by the late poet laureate in 1997. Now, a pound;250,000 grant from the Northern Rock community trust means the centre and the Iron Man will soon have a permanent home in north-east England as a manuscript and artwork archive and a focus for events; artistic director Elizabeth Hammill has her eye on a Victorian mill near Byker.

Beyond the headlamps and through the door, the exploration of the folk tale tradition from campfire yarn to urban myth is the sort of grand tour that might make sparks fly out of the brain. It is also a journey into the dark heart of stories such as Carol Ann Duffy’s retelling of Snow White, in which the wicked queen “was forced to put on the red-hot shoes, and made to dance, dance, until she dropped down dead” (from Rumpelstiltskin and Other Grimm Tales, Faber). “As tongues tell on and books get written,” runs Tony Mitton’s linking verse narrative, “Life runs cruel and folk get bitten.”

Once embarked on the journey, you can’t get off the magic bus. Elizabeth Hammill’s eclectic vision and knowledge reach from gingerbread men and valiant Jacks to a contemporary “scrapyard of stories” stalked by Ted Dewan’s robotic “Sorcerer’s Apprentice” and the poisoned cocktail offered by another wicked queen, this time in Fiona French’s speakeasy-style “Snow White in New York”. Angela Barrett’s illustrations for Josephine Poole’s version of the Grimm tale can be found at the first staging post, where the raw materials of stories are laid out: places (Griselda Holderness’s jungle, Barrett’s forest, P J Lynch’s magic mountain, Fritz Wegner’s patchwork countryside); characters (water dragon, fairies, daredevil cat); and essential equipment. Chalked on the wall under the heading “don’t forget” are shoes of swiftness, flying carpet and magic sword, ring and cape. Even more crucial to the progress of the story is the list of quests:

“Build a castle overnight”; “Make three wishes (wisely)”.

Tony Mitton’s contribution, illustrated by Peter Bailey, supplies the quest that pulls the loosely themed areas together, requiring the visitor to follow on the heels of another Jack, a storyteller who has lost his heart and art, as he tries to find the source of stories. Captions provide another layer of narrative, urging us to look and listen, compare and contrast, think and feel. A section in hich Mitton invites: “So step right up and make your choice From tales still warm from teller’s voice” was waiting for an audio loop to be fitted so that Kevin Crossley-Holland’s “Sea Tongue” from East Anglia could be performed alongside Julius Lester’s Brer Rabbit stories.

Voice is one consideration; place, time and setting are others. As Brer Rabbit says: “There’s sometime, any ol’ time, and no timeI there’s new time and old time, cold time and due time, and then there’s once upon a timeI All right. I got it. Way back before there was a timeI” The artwork, much of it from unexpected sources in the United States, China and Japan, is an attraction in itself. One seductive byway on Jack’s circuitous route takes in part of the collection on representations of Red Riding Hood assembled by Geoff Fox of the University of Exeter, from Gustav Dore (published in England in 1865) to the bold graphic Chapeuzinho Amarelo of Ziraldo (Brazil, 1997). My favourite is an anonymous US copywriter’s effort from a children’s magazine produced in 1900 by a margarine manufacturer: “Now if Red Riding Hood had not forgotten to do what her mother told her, her grand-mother would not have been killed, and she could have enjoyed the lovely Golden Fleece Margarine which Red Riding Hood was bringing her.”

This is not simply entertainment for obsessive adults; children will enjoy hunting for the world’s Cinderellas - Sootface for Native Americans, Trembling in Ireland, Vassilisa in Russia - and seeing the parallels between the cunning Mally Whuppy in Alan Garner’s retelling of an ancient English story, in the Book of British Fairy Tales (Collins), Mulan the warrior princess and Finn McCool’s feisty wife, Oona. The aim is to inspire children to tell and write their own stories - an intention backed up by the story-building games, activities in the accompanying education pack and the work from schools already on display.

Tales for the Telling is part of a wider millennium project, First Words, carried out by the Dodgy Clutch Theatre Company in schools and community groups earlier this year. Work on folktales included artwork, performances, written material and, in the case of Longhoughton first school near Alnwick, Northumberland, detective work. The pupils received a fax from a Japanese storyteller looking for a long-lost aunt, who could be identified because she would have the missing half of a broken necklace. They found the “aunt” (played by an actress) in the old people’s home in their village, then had to make up the story of how she got there.

Tales for the Telling continues until November 10 at Newcastle Arts Centre, Westgate Road, Newcastle upon Tyne. Adults pound;1.50; children free; free for everyone 3.30-5pm on school days. Schools programme. Tel: 0191 230 1101; info@ccbook.freeserve.co.uk Education packs cost pound;8.95 (plus pound;3 pamp;p) and can be used alongside the exhibition or separately.The exhibition Picture This! Picture Book Art at the Millennium, which features work by 20 artists, closes on Sunday. Open 10am-5pm Saturday, 2.15-5pm Sunday. Admission free