Despite the obvious overtones, etc...
...this movie is still probably the best sequel in the series, if not easily on par with the original.
Most people say (or at least used to) that Dream Warriors was the best sequel. After having watched that movie tonight for the first time in well over a decade, it's probably worse than Freddy's Revenge, if anything.
Dream Warriors had very good effects and set pieces for its time, but everything else about it was easily as corny and campy (if not more so) than NOES2. Just for different reasons. It's ridiculously melodramatic and cheesy. Not to mention the last half hour is basically a Kids movie.
NOES2 is not without its flaws (frankly I don't think any movie in the series is all that special... just that some are a little better than others) but it's still better than almost every other Freddy movie. And is at least more honest(?) with its ridiculous moments than the other sequels. In my opinion it holds up better because of this.
Plus, Clu Gulager is a goddamn national treasure and pretty much makes the movie all on his own. I like John Saxon and all, but I've never seen a Clu performance that I didn't love. (be it in The Killers (1964), A Force of One, Return of the Living Dead, NOES2, etc) The man can do no wrong.
Also doesn't hurt that Paul Kersey's wife from the original Death Wish plays the mom. :D