This is another Disney movie directed by John Hough, but it's much, much better than the dreadful Return From Witch Mountain. Once again Bette Davis has a relatively small part despite her top billing, but at least here she gets something to actually work with, a character who at first seems sinister but is eventually revealed merely to be suffering the aftereffects of a horrible tragedy. She's Mrs. Aylwood, the reclusive owner of a massive English country estate, whose teenage daughter disappeared 30 years earlier. She rents out the estate to a visiting American family while living herself in the guest cottage, and the family's teenage daughter (who resembles Mrs. Aylwood's long-lost Karen) starts having visions of the missing girl.
For a movie so fraught with tensions between filmmakers and studio that its ending was reshot after it first opened in theaters, The Watcher in the Woods hangs together pretty well for most of its running time. Hough does a good job of building up a creepy atmosphere without resorting to too many of the explicit scares that Disney was intent on avoiding, and Davis brings both eeriness and pathos to her portrayal of Mrs. Aylwood, who starts out as your standard weird loner in the woods and evolves into a kind and sympathetic character, while still seeming sort of off-putting.
The weak link in the cast is the actual lead, teen actress Lynn-Holly Johnson, who was best known as a figure skating champion and for appearing in the kitsch classic Ice Castles. She pretty much yells all her lines, and has trouble selling the urgency of the quest to find the missing Karen as the film barrels toward its climax. Kyle Richards, as her younger sister, fares much better, and sells the otherworldly elements with more conviction.
And then there's the ending, which is completely nutso no matter how it's presented (I watched both alternate endings in addition to the more sanitized version that Disney produced without Hough's involvement). The official version is probably the most effective, but it still hinges on a random detour into confusing sci-fi that's completely at odds with the rest of the movie. The alternate versions are even stranger and trippier, with (spoiler alert) an insect-looking alien descending from another dimension to return the missing Karen. I appreciated the out-there spirit of it, but the story pretty much fell apart at that point. Up until then, though, it nicely captures an old-school Gothic-horror feel, and may even give you a scare or two.