Although he writes a well-crafted novel full of allusions and with a protagonist, Winston, who changes and grows due to his love for Julia, Orwell's primary purpose in 1984 is didactic. This means Orwell wants to educate his audience. He is trying to teach us how badly power can be abused if put in the wrong hands. His is a cautionary tale, advising readers to safeguard how words and language are used, to avoid a surveillance state, to support a free press, and to hold tightly onto democratic norms. He is trying to make as clear as possible that the alternative—a totalitarian dictatorship—means misery for most people.
For this reason, Orwell includes long passages from Goldstein's book in 1984. He wants the reader to know from a source outside of Winston's incomplete, subjective consciousness what the aims of the state of Oceania truly are. Orwell wants us to know that the misery and endless warfare in which people in 1984 live are not necessary or accidental, but deliberately manufactured by the state to keep the bulk of the population oppressed. He wants us to know that the intentions of the state are to reduce most humans to little more than animals so they can be controlled. He wants to communicate that the lust for power is endless and cruel—and that dictators don't rule in the best interests of the people. Goldstein's book provides independent confirmation of what has been floating around in Winston's mind. It explains the rationale of the state in a logical, concise narrative that both the reader and Winston can understand. It comes too at a point in the novel where we as readers have learned enough about this fictional universe to believe what the book says.
Arguably, Orwell included such long passages from Goldstein's book for two reasons. Firstly, it adds to the book's sense of realism. By giving such a long and detailed account of the Party, its history and its methods of maintaining power, Orwell creates a world which feels real to the reader. It also helps the reader to understand what life is truly like for the people of Oceania and, as such, to better identify with Winston and his anti-Party sentiments.
Secondly, including such long passages adds to the sense of drama when Winston is interrupted by the Thought Police. Like Winston, the reader is desperate to know how the book ends but his arrest prevents us from ever finding out. In one sense, these long passages act like a metaphor for Winston's rebellion: he never got to finish the book just as he never succeeded in truly rebelling against the Party by bringing about its destruction.
Orwell includes such long quotes from Goldstein's The Theory and Practice of Oligarchic Collectivism because they confirm on a different level what Winston has always thought about the Party. For example, the constant war with a number of different adversaries, always understood by Winston to be on some level absurd, is exposed as exactly that by Goldstein:
To understand the nature of the present war — for in spite of the regrouping which occurs every few years, it is always the same war — one must realize in the first place that it is impossible for it to be decisive...Secondly, there is no longer, in a material sense, anything to fight about.
Orwell writes that the book "reassures" Winston by "saying what he would have said" had he been able to make sense of it all. But he falls asleep before finishing the reading, thus depriving himself of understanding "why" this form of society has gained traction. So the book is an important plot device in the story. But it is also a method by which Orwell makes his most important points about a number of social issues: atomic war, totalitarianism, individual liberties, and free thinking. Ingsoc and the other variants of totalitarianism as explained by Goldstein are based upon a similar logic as many developments Orwell saw taking place during his own time. Including extended excerpts from the book is essential for making this point.