Rumor has it this was Craven's favorite sequel of the series.

Never heard that before but it is maybe my favorite sequel in the franchise (alongside Dream Warriors).

It's a great film and truly typifies the 'Dream Trilogy' (3, 4 & 5). That's when ANOES really came into it's own, I've seen some describe them as 'MTV-like'. Awesome music, the fantasy aspects of the dreams are really played up, Freddys personality in these films is what is most commonly associated with him (more so than the more serious persona in 1 & 2).

This was the highest grossing film in the franchise domestically until Freddy vs Jason, when adjusted for inflation ANOES 4 is still the second most successful at the US box office. This really was Freddy mania at it's peak.

IIRC he compliments it in the Never Sleep Again documentary. I think he had quite a bit of respect for Harlin's technical skills. He might have been less keen on Dream Warriors because they rewrote his script so heavily.

Yes, Craven proclaimed his love for A Nightmare on Elm Street 4 while promoting Wes Craven's New Nightmare on VHS. "The script was good, the director was talented and I enjoyed Englunds performance in that picture"
Englund also went on record stating that he loved A Nightmare on Elm Street 4.