Why were the actors in the original able to convincingly act to puppets and bluescreen, why was the dialog in most places much more natural. What happened. Lucas can’t have slipped that much in 16 years between Return of the Jedi and Phantom Menace. Some essential thing was missing and I can’t quite quantify what.
The “Secret History of Star Wars” is mostly about trying to answer this question. It’s an interesting read if you have the time. Basically, the conclusion is that Lucas never slipped. He was always this way, even back in the 1970s. But the difference is that when making the OT, Lucas had much less control and was beset with problems and limitations. This had the effect of smoothing over many of Lucas’ weaknesses. The dialogue was often rewritten or cleaned up by Lucas’ friends, there was more push back about things since Lucas had not yet ascended to the status of demi-God at that point. An entire movie (Empire Strikes Back) was directed by Kershner, often without any oversight from Lucas, etc.