the biggest problem is that it's boring
When I tried watching this film as a kid, I found myself confused and bored shitless. Maybe I just wasn't particularly bright growing up, but I honestly had no clue what the hell was happening in this flick during the 30 minutes of my time I gave it as a child. Though they had been released, I had not seen the Peter Jackson films yet, so I didn't know what I was missing.
Years later, after having finally having gave the LOTR trilogy a watch and completely falling in love with them, I decided to give this film another look and oh my God, it has not improved! Aside from the obvious problems of rushed pacing (I don't think I would've even been able to follow this had if I didn't see the Jackson films already) and a lack of scale as a result of its limited runtime/budget, it's also just straight up boring.
The characters are just not well defined here. Frodo, Gandalf, and Aragorn are okay, but the rest of the Fellowship are sorely lacking. Sam, as everyone's pointed out, is annoying here. Merry and Pippin are practically indistinguishable from one another, while Legolas and Gimli practically get nothing to do. The worst offender is Boromir, whose characterization is so bland and lacking in presence throughout, it honestly comes out of left field when he tries taking the Ring from Frodo in this version.
On top of that, the movie is also severely lacking in warmth and humor. The whole film has a very cold, serious feel to it. Very rarely does the film ever settle down for a hug or a joke. Say what you will about the crying scenes in the Jackson films, but at least those movies had warmth to them. For as sappy as they get, we really do feel the bond and friendship the characters form throughout the trilogy. In this however, aside from the hobbits, I never got a sense that these guys particularly like or care about one another. This largely stems from the aforementioned lack of humor, which is almost entirely given to Sam in this version. The rest of the characters are pretty much humorless.
The film gets points for its creative art style, mixing traditional hand-drawn animation with rotoscoped live-action footage, and for getting SOME characters right (mainly Frodo, Gandalf, and Aragorn). I might even dare to say I like Frodo slightly better in this version, thanks to him being a bit tougher and more resilient here than in the Jackson films. I also think the Ringwraiths and Balrog came off much scarier here than they do in the live-action films. The occasional gratuitous gore is also fun to watch but aside from that, there's very little to recommend here. It's really only a must-watch for diehard Tolkien fans.