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How is the story "A Very Old Man with Enormous Wings" an example of "magical realism" and an allegory?

The short answer is, only in a limited fashion. By that I mean, you can make allegorical connections between some elements of this wonderful story and reality. You can argue that the state of the angel represents a fallen or collapsed divine order. You could argue that the inability of the villagers to communicate with the angle represents the failure of faith and clear communication between religion/the divine and daily life. Those would be valid. However, there is a wild card element to magical realism, a sense that the world is too big for logical or allegorical frames. That would be things like the crabs, or the odd miracles done by the angel.