Well, keep in mind that episode one was a children's movie. It was aimed at the 7-12 year olds who wanted to be anakin, and who would, if caught early on, age appropriately to see the next 2 episodes and still want to be anakin.
It was never written to appeal to adults, and it wasn't meant for the star wars die-hards.
If you compare it to regular children's fare, it is good. Surpasses regular children's fare in some ways, not as good in others, but certainly on par with 'good' children's movies.
If you compare it to the best action/science fiction adult fare, it is mediocre at best.
He caught enough flack from the first that he could do some changes for the next two, and they were an improvement, but not much - they were still very obviously squarely aimed at teenagers.
That being said, many movies prove that one can appeal very strongly to a very wide range of ages - take pixar's films, for example, such as the incredibles. It has some character with a problem at every age group, and both children and adults love it.
Lucas did not write the story in a way that appeals to a wide demographic.
But children loved Episode 1. And their parents took them so they could experience the star wars universe, even if it didn't appeal to the parents in its new form.
It was a success, and those who complain about it don't understand that they are not the intended audience.
That being said...