That's pretty much what I imagine Neverland is meant to be; a blank canvas that becomes covered in paint as a child dreams.
I also believe it is meant to represent the ideal reality from a child's point of view. Neverland, filled with exciting dangers and overflowing with adventure, is just what a child wishes the real world to be - little order and discipline, adventures (real or imaginary...whichever one chooses), few adults to spoil the fun, but just enough to invoke challenge.
However, in regards to -Peter Pan- as the novel and play, Barrie's personal Neverland seems to be more of an arena. It is a well known theory that Barrie is Peter, but it is also known that Barrie based Hook off of himself (see the Dedication to the Five essay). The way I read and understand the play is that Barrie's story is conveying an internal battle that was occurring within himself in real life. Peter represents eternal youth and joy, a trait Barrie most certainly admired and wished for. Barrie, the way I see it, split his personality in two - into Peter and Hook - and turned Neverland (his ideal reality) into an arena in which the more desired personality (the fun-loving, free youth that is Pan) could overcome the strict, harsh, unwanted character (Hook). Hook is a confused character, chasing always after his youth, running aways from his inevitable mortality and Barrie, in fleshing out his Neverland, created an arena in which he could throw out, as it were, these unwanted traits, and become youthful and free again.