Labrynth (though, this was really a Henson / Lucas movie).
If you haven't seen it, it's worth keeping an eye out on discount DVDs at Walmart. It shows up every now and then for like five dollars. Awesome movie.
I shared it with my daughter when she was 6, and it is now her favorite, but I'll note...the beginning is rather dark and creepy, and every kid I've watched it with under the age of 10 who hadn't seen it was scared by it until the movie really starts rolling. So, don't be surprised if your kid buries into your lap (or ducks under a blanket) during that part.
Other interesting trivia...the film flopped commercially (even though being vastly superior to Dark Crystal, I think), bringing in nearly half of the budget used to produce it. This frustrated Henson, and as a result, this is the last movie he ever directed before his death in 1990.
Also, the owl was the first attempted photo-realistic CGI character on screen. And, if you see the movie, you'll see they did a great job (and foreshadowing of where CGI was going).
Hoggle (one of the supporting characters) constantly has his name mispronounced by the main characters, which frustrates him to no end. After their meeting, Sarah (the female lead) calls him "Hogwart". Hogwart comes from a British humor book "The Compleet Molesworth". Though, now it's known for other reasons (I'm looking at you JK Rowling!)
Anyhow, it's a fun and cute movie with great David Bowie music in it. Check it out!