Phantasm II begins right after where the first film left off. The freaky dwarfs have invaded Mike's home and Reggie must foil the Tall Man's attempts at kidnapping him. Flash forward seven years and Mike is in a mental institution. He is released upon admitting that the whole Phantasm experience was made up only to find that in his absence the Tall Man has been plundering many of America's small towns and thousands of graves are empty.
After the Tall Man kills Reggie's family in a gas explosion, Reg teams up with Mike to hunt him down and kick his head in...again. All they have to do is follow the trail of dead people, right? And this time they are ready for whatever outlandish tricks he's ready to play on them, armed to the teeth with quadruple-barrelled shotguns, flame-throwers and chainsaws. Complicating matters are Mike's inexplicable visions of the future and psychic connections to a mysterious girl he has never met before.
As before, the Tall Man is the best thing in the film. Angus Scrimm is so wonderfully silent and unholy that no matter how slick and entertaining the rest of the film is he'll come out on top.
Don Coscarelli was given a budget 10 times that of the original by Universal, but they did interfere with production quite a lot, much to his annoyance. They said that only one of the original cast members could return, so he chose Reggie Bannister and re-cast Mike with James LeGros (after turning down Brad Pitt!). It does kind of ruin the continuity a bit but it's not terribly distracting.
They also demanded a more simple and linear story, so don't expect any of the bizarre dream sequences and flashbacks. If you're a big fan of the first this might seem disappointing but you know how studios love to think less of their audiences.
The higher budget helps Phantasm to have a bigger scope than the original. The first half of the film feels like a road movie with lots of pretty scenery while the rest is kind of like a low-rent Ghostbusters/Lost Boys clone. Which sounds like a negative point, but the hokey tone of the film vanishes when it heads off into HP Lovecraft territory.
If you're looking for answers as to what the first film was all about then you won't find many. In fact it raises more questions than anything else. But it's still a fun ride. I'm just kind of annoyed that the music took the more generic synth approach that was common in the 80's instead of the funky 70's beats we got before. The main Phantasm theme is still there for your enjoyment however and gets a great finish on the end credits.