That movie probably would be among my all time favourites as the last to use the "classic" LBT coloring style & confusing plot.
Interesting view and a very good post to start a discussion
Personally I had quite the opposite impression of LBT 7 being the second time that there was a very serious breach in the style and plot of LBT.
The first breach would have been between the original and the first sequel with the later changing the setting and style entirely (sharptooth leafeater relationship, songs etc.). One could argue that LBT 5 too brought about some change (being the first to be directed by Charles Grosvenor and also his (in my opinion not so positive habbit to turn everything red in case of danger)), but I think it was LBT 7 that really introduced some major breaches of style and story.
One of the breaches in terms of style was the CGI in the opening sequence of LBT 7. I'm not sure if it was the first time CGI was used in LBT, but in any case it looked to me like the most obvious case till then on the one hand creating a more three dimensional impression but also looking a bit "artificial" to me. Further style changes in terms of appearance were such details as green-colored Lava and space imagery other than in the introduction. One may argue though that this space views during the song "Beyond the Mysterious Beyond" (I like that one) was sort of the continuation of another change in style which had been introduced by Grosvenor, namely using the songs for some somewhat more "surreal" images or elements (previous examples can be found in "Big Water", "Friends for Dinner", "Lone Dinosaur" and "On your own").
In terms of story I was in a rather split mind about LBT 7. It introduced the very interesting character of Pterano and I just loved the fact that for the first time (other than the alusion to Littlefoot's mother in the song "Always there" they acknowledged the events of the first movie in one of the sequels). On the other hand I really disliked that kind of Star Trek style LBT crossover posed by the Rainbowfaces. Personally I would have prefered if they had kept them more mysterious. In case of LBT 6 it was left to the audience to decide whether or not to believe in Doc as the Lone Dinosaur while the end of LBT 7 not only rammed the idea of aliens from outer space down the throat of the audience but also left Littlefoot oddly uncaring about it.
Furthermore I would have loved for the writers of LBT 7 to care a little more about many details. The whole thing about the Stone of Cold fire seems to be like a loose end (Littlefoot sees a stone that is utterly different from a regular flying rock they all go to find it and it just turns out to be a regular flying rock?). Then there are the odd motivations of the rainbowfaces who on the one hand seem to instigate the dinosaurs to act (the whole basis for the song "Beyond the Mysterious Beyond"), then they seem to quarrel about whether or not it is okay to help them thereby disobeying what seem to be "Starfleet orders" of some sort, and then after they help the kids (with using the volcano as an elevator uncomfortably pushing the boundaries of "LBT realism" up to that point) they end up telling Littlefoot that they had pretty much known all along that there hadn't been such a thing as the "Stone of Cold Fire" (after THEY had actually been the only ones to bring it up and to know about what it was at all (none of the other dinosaurs ever seems to have heard of it at all)).
Also the writers didn't seem to care much about making the actions of the adults realistic. For examply if only Littlefoot saw that stone and just told his grandparents about it, how come it caused so much of a stir as to result in some kind of Great Valley gathering? How did the word spread and what on earther was that "word" to cause so much concern on the one hand, while on the other hand all of the adults were utterly convinced that there was absolutely nothing unusual to begin with?
Pterano's actions were similarly strange. For example how come he was making his plots right amidst sleeping dinosaurs and plotting so loudly that anyone with not too solid a sleep would have woken up and heard it? And also why on earth did he kidnap Ducky? What did he want to accomplish by abducting her? Had he just left her there the experience had shown that most likely nobody would have cared while kidnapping her was the only way to make sure that the other grown up dinosaurs would do something rather than just shrugging it off just like Littlefoot's story. But even so, what they did was holding a very, very, veeeery long conference before deciding that sending two other flyers after them might be a good idea.
LBT 7 could have been great, in my opinion it was not because some interesting ideas were combined with way too little concern about fundamental plotpoints as well as details.
