I watched this on dvd last night since I hadn't seen it in 20+ years and all I can say is "wow." I was iffy about it as a kid, but I am pretty blown away now. With the possible exception of those by Danilo Donati (Flash Gordon) I cannot think of another movie with cooler sets. That observatory has got to be on the short list of coolest ever. It's a shame they had to take it apart.
The old school Jim Henson creatures were really slick as well, easily a step up from most of those in the original trilogy, and certainly on par with Yoda and Jabba. I totally remembered the Skeksis and the podlings and all the others, especially Frank Oz's Chamberlain, with his sly smile and "hmmmmm" noises.
Another thing I wasn't able to appreciate as a kid was the use of color and the attention to detail. Imagine if a whole movie took place on Felucia, that is the level of care given to one of the environments, filled with creatures everywhere. The movie takes its time with these as a few moments are spent simply tracking the camera along a forest floor.
The only downside is that the story is a pretty paint by numbers "quest" deal, and the movie drops a lot of hints as to what the resolution will be from the start.
Oh, and it marks the only time I was fearful for a muppet!
Anyhow, give this a spin, as it appears that a sequel is in the making.