Freddy's Revenge does have some things going for it that really ought to be highlighted, and it holds up well as low-budget 80s horror. As mentioned at various points in this thread, the make-up work on Freddy is excellent, Christopher Young's score is a winner, and it is true to the darkness of the original in a way that none of the other sequels were, or indeed even attempted.
The other thing is, I'm kinda sympathetic to that movie for basically being rendered an outlier retroactively. Not that bringing back Nancy and restoring some of the original ruleset wasn't a great move for Dream Warriors, but it's sort of a parody of the Indiana Jones trilogy situation, where Temple of Doom is suddenly a black sheep because Last Crusade went the crowd-pleasing route and basically remade the original movie. Retroactively, Judeo-Christian based artifacts, Nazis, and cutting to Indy's college after the prologue became series motifs, and Marcus and Sallah became "regulars." Temple of Doom consequently sticks out like a sore thumb once the trilogy is taken as a whole, especially by people who did not experience the series as it was released, due to its sin of actually tried to cover new ground. In the case of both franchises, if you consider a world where only the first two movies exist, the part 2s work just fine as sequels - only due to the respective third installments' "return to form" (and establishing a template) do they become wrong turns in the context of their series.
So, okay, the comparison has holes in it in the sense the Freddy's Revenge is still a bad movie and Temple of Doom is the shit (and better than Crusade, to my lights), and Freddy's Revenge does tell some established rules to go to hell in a way that goes beyond "shaking things up" to being plain wrongheaded and disrespectful. But it's not like it's conceptually invalid to try a Freddy posession story, nor is it unacceptable to decide to reprise the house from the first movie (and introduce us to the new occupants) instead of the surviving heroine. In a sense, Freddy's Revenge is sort of like a haunted house movie, which is sort of the whole point of the Clu Gulager character being repeatedly beleaguered by malfunctioning appliances and combustible parakeets and other unintentionally comical bullshit.
I'm grateful they didn't continue the direction when it didn't work, but I'm also fine that they tried. And people tend to forget that despite the critical ravaging the movie took (and all the sequels did), the box office was screaming.