The battle with the Lizard King; fifteen seconds of waiting followed by five seconds of split-second button inputs. Dirk's badass reaction to clearing the room is worth the pain, though. He's much easier to beat on the DVD player port.
Be prepared to lose a lot of lives on the electric checkerboard room, especially if you play it on the real hardware. In contrast to the Lizard King, this room is much harder on the DVD player.
Uncanny Valley: Daphne's stilted explanation of how to kill the dragon and get his key is an audio version. The tone (and body language) she uses, instead of implying distress or urgency, sounds like it's all a game to her.
Dragon's Lair II: Time Warp
Bellisario's Maxim: No, it's never explained how an evil warlock and a time machine are siblings.
Ensemble Dark Horse: The Big Beautiful Woman Eve that Dirk meets at the Level 4. If you read the comments on the videos of the game on Youtube, you'll find a huge amount of fans in love with her.
Foe Yay/No Yay: Near the end of Level 6, when Dirk unwraps the "mummy", believing it to be Daphne, he finds that "she" has Mordroc's head before morphing back to the wizard himself, who gives him a kiss on the cheek before Dirk pushes him off. This is pretty Squicky and a bit of Fan Disservice.
Funny Moment: The first part of Level 3 that involves Tweedledum and Tweedledee and the Queen of Hearts.
Hilarious in Hindsight: As Ludwig van Beethoven's Symphony No. 5 plays entirely in the background of Level 5, you have to fight off a fire-breathing cat while going through the skies of light and darkness during his creative gust and collecting treasures, one of them a "golden butterfly". Nine years later, there's Fantasia 2000, where Symphony No. 5 does indeed play, and though there are no people or musical instruments, there are indeed objects that are shaped like butterflies (though not golden) and bats as they fly through skies of light and darkness, with the latter ultimately conquered by light.
Inferred Holocaust: Dirk's presence ends up causing the fall of Eden in Stage 4. What's worse is that this was the only level without a confrontation with Mordroc, meaning he didn't even need to travel there in the first place!
Mordroc placing the Death Ring on Daphne in the opening movie. When it happens in the game, we're looking at Dirk's POV so we can't see it too well, but the version seen in the opening is up close through Daphne's POV, showing her and hand gruesomely transforming and having her make a terrified, painful scream, highlighting the Transformation Trauma and Body Horror she goes through.
Special Effect Failure: At the beginning of Level 5, when a few objects flash upon being triggered by each button press, no "flash" sound is emitted; and it continues in this way until you fall into the skein and Mordroc shouts out, "Princess Daphne is MINE, YOU FOOL!"
Tear Jerker: When Dirk believes he's failed and that Daphne is dead, his anguish is pretty clear to see. Thankfully, he's proven wrong a few moments later.
What Do You Mean, It Wasn't Made on Drugs?: The entire game comes to mind, but especially Levels 3-5. In order, these include the Alice in Wonderland level, which manages to be even more surreal than the source material; the Garden of Eden level, with a camp guardian angel, a very obese Eve, and two particularly slick snakes; and the Beethoven level, which begins with Dirk somehow being the size of a mouse and thus being easy prey for Beethoven's cat, moves on to Beethoven and his piano smashing through the ceiling and soaring into the atmosphere, and then just gets weirder from there. Don Bluth has gone on record as saying that the time-and-space-travel element allowed him to really run with the idea that anything is possible in animation.