I'm not a big fan of "I've been taken over by an alien entity" stories, and Next Gen is pretty much to blame for that. They did it a lot. This episode is the first of many, and in a way it feels even more frustrating for it, because everyone's so dang patient about it since it's the first time that it's happening to them.
On the plus side, it really brings home what a great actor Patrick Stewart is, as his performance while possessed is the best of all. And Brent Spiner really steals the show with his discovery of (and subsequent impressions of) Sherlock Holmes.
I don't think the characters were intended to be a metaphor for them, but the Anitcans and Selay made me think of the Israelis and the Palestinians... two sides that have so much bad blood between them that they can't stop hating each other. But the topic is only brushed on in one of those "let's show how much better we are than the 20th century" lines, and the Anticans seem to be used more as an argument in favor of vegetarianism more than anything else.
Nostalgia Segment: when we first watched this episode in 1987, for some reason my mother and I thought this was the second appearance of Assistant Chief Engineer Singh, and were surprised when they killed him off. But rewatching it now, I see this was his only appearance. Alas, poor Singh... I knew him not as well as I thought I did, Horatio...