Well I actually think the core story was pretty good...he fucked it up in the details. Like Dialouge, Edits, pacing, things like that but the general story is pretty good. I mean it's hard to enjoy the movie when there a lines like "No....it's cause I'm so in love with you." or right in the middle of the climatic emtional battle a fucking goofy ass robot flies into frame. It's sad cause you know he's got it in him to make it really good, but he just didn't. I mean that scene where you get that side view of Vader's head and the mask is locked into place, and helmet is lowered on and then he takes his first breath and it pushes the smoke away....It's amazing. Course that's over shadowed by some anal need to dress Clone Troopers in CGI costumes instead of just making the fucking costume.
I think I have a possible theory on why George Lucas screwed up the prequels. It's because he had kids.
See, I've noticed something (Bernie's going to love this). Whenever most people have children, it's as if half their brain shuts down. They become dumber, they have this strange desire to have even more children and even more children (like my step-aunt and uncle who have 4 kids under 6), and they start to do really stupid things that non-breeders don't do, like drive SUVs. Their whole world revolves around the "miracle" of children and all sense of reality is erased from their consience.
Now, as far as I remember, Mr Lucas had his first child between Empire and Jedi. As you notice, Empire was his best movie, yet most fans say Jedi was a bit of a disappointment, especially with the Ewoks (giant teddy bears? Did Georgie have teddies on the brain thanks to his child?) And he's already admitted that he focused the prequels on children, whereas when he was writing the original trilogy, he wanted something mature and intellectual as well as action packed.
He basically dumbed down the sequels to his "parent" intellect level, so that they would be kid friendly.
The only flaw with that part of the theory is the fact that Sith was PG-13, as well as the fact that Indiana Jones was filmed when he had kids but didn't suck. However, this is explained in the rest of my theory.
The other part of my theory was that, like most rich-as-fuck, brainwashed-by-jews Hollywood directors, he equates a good movie to something where CG comes first, and storyline and dialogue is a dead last. This explains why, even after having kids, the Jones trilogy didn't suck, because it didn't rely on a lot of CG. Unfortunatly, CG is not only Hollywood's greatest blessing, it's also it's greatest curse, because it makes it VERY EASY to make shitty movies (See: Ultraviolet).
Oh, and to throw one more idea onto the table, he also wanted to do the movie HIS way, and refused to listen to much criticism from his staff and the fans, which made it even worse.
So, in conclusion:
Massive amounts of CG + Parent complex to make everything child-friendly + doing things his way only = Very shitty prequels.