It's easy to see this as a conflict between literacy (represented by the Old Man) and illiteracy (represented by the Childlike Empress), but I don't think that was what was intended.
Just before this passage (still within chapter 12), we read in the message of The Old Man of Wandering Mountain (from the 1983 English translation by Ralph Manheim, formatted and converted by me from ALL CAPS):
What you achieve and what you are,
Is recorded by me, the chronicler,
Letters unchangeable and dead,
Freeze what the living did and said,
This is the end of what you once began,
You never will be old, and I old man,
Was never young. What you awaken,
I lay to rest...
The conflict is not related to reading as a skill or hobby per se, but the nature of the written word as representing finality. In Chapter 13, the Empress tells Bastian that "there won't be any more Fantastica" if he is unable to make any wishes. The Empress represents dreams and possibility. The Old Man simply writes down what happens (as he himself tells the Empress in Ch. 12). Simply writing down a history in the way that the Old Man does is not imaginative, rather, it produces the "death" that the Empress speaks about which is the result of a lack of wishes.
It's a dualistic system
Look just after the passage you quoted, where we see (another) description of AURYN (in this case, as it appears in the Old Man's copy of The Neverending Story) (emphasis mine):
It was tilted in such a way that she could see the binding, which was of copper-colored silk, and on the binding, as on the Gem, which the Childlike Empress wore around her neck, she saw an oval formed by two snakes biting each other's tail.
The AURYN symbolizes a dualistic system of two snakes in constant conflict, similar to other dualistic systems such as the Chinese concept of Yin and Yang. The Old Man is not evil (he never commits any evil act or appears inclined to do so), but is distinct from the Empress in fundamental essence. Written language, as a concept, is assigned to the Old Man's half of the universe.