One is overly revered because it was the first film in the series and had the benefit that comes with discovery. The other was crushed by the weight of impossible expectations. Objectively speaking, they are both fine introductions to their respective trilogies which pave the way for arguably superior sequels (you may prefer Star Wars to Return of the Jedi, I happen to prefer The Phantom Menace to the somewhat pandering but admittedly more entertaining Attack of the Clones). They both suffer from campy acting, stilted dialogue and inconsistent pacing. The Phantom Menace lacks a rogue-ish Han Solo character, even if the film (by virtue of being the fourth entry in a long-running series) doesn't need a cynical 'audience surrogate' this time around. Natalie Portman was always unfairly derided for not playing Queen Amadala as a clone of Carrie Fisher's Princess Lea. Her somewhat cold, Elizabethan portrayal is both her best performance in the prequel trilogy and a prime example of fans objecting primarily because it wasn't identical to the previous Star Wars universe (Lucas's apparent cave in Attack of the Clones, making Padme 'sexier', is one reason Episode II is the weakest of the series). That The Phantom Menace (and by proxy the prequel trilogy) operates differently than the first three Star Wars films does not automatically make them inferior, merely different.
Taken as an individual film or the start of a three-film saga, it has eye-popping visuals, at least three terrific performances (Liam Neeson, Ian McDiarmid, and Pernilla August), a fine (if famously compromised) score by John Williams, and a politically wonky story that took hits for being overly complicated while serving was a chilling modern-day parable (a 'good' politician brought down by "baseless accusations of scandal" -- remind you of anyone who was president in 1999?). Yes, the original Star Wars had a simple narrative, basically following the Joseph Campbell heroic journey. But Phantom Menace (and the prequel trilogy overall) compensates for its admittedly inferior characters with a more complicated and morally grey plot. Critics and pundits always complain about the simplicity and spoon-fed narratives of mainstream films. Yet when one comes along that actually requires audience to pay attention (Mission: Impossible, Quantum Of Solace, etc), they all complain that "It's too confusing!" or "It's too complicated and muddled!" You won't get me to admit that Jake Lloyd is cooler (or a better actor) than Mark Hamill, but I have always appreciated the intricate plotting of the more ambitious prequel trilogy. And for a film that's been knocked as 'kid-friendly' (more on that later), it always struck me as darkly ironic that the entire journey in The Phantom Menace is basically a trick in order to pull off a aenatorial coup, replacing the decent Chancellor Valorum (Terence Stamp) with Palpatine (who is, of course, not so decent). Maybe kids didn't realize it at the time, but every single character, be they good or evil, was working for the villain to further his authoritarian goals (this is actually the running subtext behind the fantastic Clone Wars cartoon series that premiered in late 2008).
Whether you like the pod-race or not (admission -- I don't), it is a triumph of technical action film-making. Of course, it's also the scene where Lucas's tilt toward 'juvenility', also represented by Jar Jar Binks and Jake Lloyd's performance as Anakin Skywalker, hits hardest, as the use of comedic announcers with cartoon-ish vocals stands out as something that just doesn't fit within the Star Wars universe. Whether or not the god-awful narration is evened-out by darkly comic relief (where Tusken Raiders murder the other pod racers purely for kicks... I always laughed at that) is a judgment call. But one bad scene, which sits awkwardly in tone with the rest of the six film-saga, does not a movie make. And if one centerpiece action scene doesn't quite hold up to repeat viewings, the other one does. Even the most virulent detractors of the picture openly admit that the climactic light-saber fight between Darth Maul and the two Jedi warriors (Qui-Gon and Obi-Wan Kenobi) is exactly what we nerds waited sixteen years to see. It's not as emotionally engaging as the high-water mark duels in The Empire Strikes Back or Return of the Jedi, (my wife and I affectionately call it 'Duel of the Red-Shirts') but it is the most technically perfect light-saber fight in the entire six-film series and it beats the living crap out of the downright pathetic 'old man vs. asthmatic robot' slap-fight in Star Wars.
Of course the film does have its issues, some of which were noted above. Perhaps because Lucas knew that he was going to get to make the next two chapters, The Phantom Menace lacks any real character arc for any of its major players. The dialogue is occasionally stilted and delivered in a relatively rigid fashion, as if most of the cast was directed to 'do what Guinness did in A New Hope'. In terms of plot, it is quite self-contained, but as a character piece it is clearly just part one of a three (or six) part story. The four-part action climax, a clear attempt by Lucas to top the three-pronged finale of Return of the Jedi, suffers from a lack of engagement in three of those action sequences. The space dog-fight, the Padme blaster shoot-out, and the large-scale battle of Naboo feel more perfunctory, which is ironic since they are the sequences that resolve the prime conflict, while the light-saber battle is basically two Jedis dealing with unrelated Jedi business. Slight digression, but I love that the two Jedi stumble upon the first Sith warrior seen in centuries and they immediately set out to kill him as quickly as possible. Simple questions like "Who are you? What do you want? Who are you working for?" never come up.
Arguably the biggest story problem is that Anakin saves the day completely by accident, while the biggest character issues is that Jake Lloyd is pretty terrible as Anakin Skywalker (if you watch the terrific documentary on the Phantom Menace DVD, titled "The Beginning," you can literally watch Lucas pick the wrong kid to play young Skywalker). That the Jedi are cold, unfeeling bastards basically sets up their downfall in the next two films. That Anakin is such a naive and wide-eyed innocent actually makes his final destiny that much more heartbreaking. Lucas didn't want an obviously troubled and disturbed Anakin turning into Darth Vader. He wanted a completely good young child to slowly morph into a person capable of complete evil. Just as, over the course of the prequel trilogy, the seemingly good Republic allows itself to become a tyrannical dictatorship out of fear, so too does Anakin's fear allow him to be undone. Point being, especially if you know what's coming, this is all pretty heavy stuff for a 'kids' film'.
But in the end, Star Wars Episode I: The Phantom Menace *is* a kids' film. It is a sci-fi outer-space fantasy adventure designed to appeal to kids who are about as young as you were when you first saw Star Wars. We may cringe at Jar Jar Binks (even as we ignore that he's barely in the film after his introductory moments), but younger audiences do find him funny and charming. We may wish that Jake Lloyd was a bit darker and introspective as the boy who would be Darth Vader, but younger boys see themselves in him and his wish-fulfillment fantasy adventure. Come what may, warts and all, The Phantom Menace was always intended as a gateway drug, a kid-friendly space opera designed to snag young audiences into the world of Star Wars just as it was being reborn. In the 13 years since it was first released, an entire generation of moviegoers grown up loving or liking The Phantom Menace in the same way we fell for Star Wars all those decades ago. If Lucas had given us the Star Wars prequel that was tailored-made for the now-adult audience that grew up on the franchise, if he had made Anakin quasi-evil right from the start, had he filled the film with unrelentingly graphic violence and characters that lacked any real kid-appeal, there is little chance that kids today would still be playing Star Wars on playgrounds all across America.
In all objectivity, I wish The Phantom Menace was a better movie. I wish it was a tighter picture, that the all-important pod race sequence wasn't overlong and relatively suspense-less. I wish Lucas didn't feel the need to make the enemy robot army into chit-chatting clowns and that he had cast a better actor as Anakin. But The Phantom Menace is still a good fantasy adventure picture, arguably better plotted and more visually imaginative than any number of would-be blockbusters that have followed its path over the last decade. And it is absolutely a Star Wars movie that holds its own against pretty much any entry in the series with the arguable exception of The Empire Strikes Back (which, with its scaled-back and character-driven intimacy, is the odd-man out in the six film saga). And as a gateway drug that successfully ensnared an entire generation of young kids and turned them into Star Wars junkies as well, it is an unqualified success.
You can still find kids playing Star Wars adventures on the playground this very day. They pretend to be Anakin Skywalker, Padme, Obi-Wan Kenobi and any number of characters from both trilogies. You don't hear them complaining that "Jar Jar sucks!". You don't hear them protesting that "George Lucas raped my childhood!". For a generation of kids who came of age 13 years ago, The Phantom Menace, Attack of the Clones, and Revenge of the Sith ARE their childhood.
For more Star Wars-related essays, go HERE, and HERE.