"Nice loud howl, Harry - exactly - and then, if you'll believe it, I pounced - like this - slammed him to the floor - thus - with one hand, I managed to hold him down - with my other, I put my wand to his throat - I then screwed up my remaining strength and performed the immensely complex Homorphus Charm - he let out a piteous moan - go on, Harry - higher than that - good - the fur vanished - the fangs shrank - and he turned back into a man. Simple, yet effective - and another village will remember me forever as the hero who delivered them from the monthly terror of werewolf attacks."

"Books can be misleading" said Lockhart delicately.
"You wrote them!" Harry shouted.
"My dear boy," said Lockhart, straightening up and frowning at Harry. "Do use your common sense. My books wouldn't have sold half as well if people didn't think I'd done all those things. No one wants to read about some ugly old Armenian warlock, even if he did save a village from werewolves. He'd look dreadful on the front cover. No dress sense at all. And the witch who banished the Bandon Banshee had a harelip. I mean, come on -"
"So you've just been taking credit for what a load of other people have done? said Harry incredulously.
"Harry, Harry," said Lockhart, shaking his head impatiently, "it's not nearly as simple as that. There was work involved. I had to track these people down. Ask them exactly how they managed to do what they did. Then I had to put a Memory Charm on them so they wouldn't remember doing it. If there's one thing I pride myself on, it's my Memory Charms. No, it's been a lot of work, Harry. It's not all book signings and publicity photos, you know. You want fame, you have to be prepared for a long hard slog."
He banged the lids of his trunks shut and locked them.
"Let's see," he said. "I think that's everything. Yes. Only one thing left."
He pulled out his wand and turned to them.
"Awfully sorry, boys, but I'll have to put a Memory Charm on you now. Can't have you blabbing my secrets all over the place. I'd never sell another book -"

The way I read CoS, the Homorphus Charm is real and its effects are permanent (all bolds in the quotes below are mine):
Apparently, from the moment the werewolf turned back into a man, there were no more werewolf attacks in the area.

I conclude that Lockhart is telling the truth here.

1. This is the penultimate chapter of the book, and a point in the story when Jo Rowling is in the process of answering the questions that the book has raised
2. Lockhart expressively states that what he has told the boys are his secrets
3. He intends to keep his ugly secrets hidden by putting a Memory Charm on the boys

Since Lockhart is telling the truth, it follows that

• An Armenian warlock (at least) once saved a village from werewolves
• Lockhart tracked him down
• He gave Lockhart a detailed description of how the werewolf was defeated
• Lockhart Obliviated him

If we accept that Lockhart did do his utmost to get all the details right (except for the wizard performing the deeds), then his own account of events (in the book, acted out in class) must be accurate:

the wizard's wand at the werewolf's throat
the piteous moan
the vanishing fur and shrinking fangs
the effect of the charm: turning the werewolf back into a man
how long the effect lasts: forever

Of course, the last two deductions run completely contrary to the generally accepted truth in the wizarding world in all the subsequent books. I don't think Jo Rowling made a mistake, though - she must have known, while writing CoS, that Lupin would enter the picture soon. And yet she gave considerable weight to the Homorphus Charm. This makes me think we will come across this charm again in DH.

But why does the wizarding world insist on shunning werewolves rather than curing them? The only logical reason I can come up with is that knowledge of the Homorphus Charm is extremely rare - the Armenian warlock was probably one of the very few wizards competent to perform it, for all we know. But if just one more of these persons appear in DH, the Homorphus Charm references in CoS will make sense to me.

Yep! Thanks Gred&Forge4ever for the great post. Now we can be quite sure that the charm really exists.
Nevertheless I'm still not convinced it is a permanent spell. Sure, there were no more werewolf attacks but we also don't know exactly what happened to the man that formerly was a werewolf. Maybe they (people in the village) arrested and/or killed him so he would never ever mean a danger to them. We just don't know.

Don't get me wrong, I also hope there is a cure for Lupin and Bill and all the others, I just don't believe it is this charm. I mean...let's assume the spell is permanent but so difficult not many wizards are able to handle it. Don't you think Dumbledore, the greatest wizard ever, would be one of the able? I can't believe he would let Lupin suffer through all the years when there is a spell that could help him.

I came up with the idea last night that being able to perform the spell might be something inborn, like Parseltongue. There haven't been any examples of that sort of thing in any of the books to support that idea, though.

The fact that the evil werewolves could be cured and forced to just be regular wizards again would be a distinct self-gratifying come-up-ance I would think for Jo since I seem to get the impression she actually likes Lupin & Bill but isn't a big fan of Fenir, et.al.

I came up with the idea last night that being able to perform the spell might be something inborn, like Parseltongue. There haven't been any examples of that sort of thing in any of the books to support that idea, though.