I think that Chinese Ghost Story 3 sometimes gets a bad rap because it's hard to watch this film without comparing it to its predecessors (it's essentially a carbon copy of #1 with half the magic - everything from the opening bloodshed to the evil sister is rehashed). But compared to other films in the genre it's actually a decent film on its own merits and satisfying overall.
More scenes are devoted to dialogue than is typical and the fantasy elements are reserved to satisfying but short bouts of swordplay and magic, but I personally enjoyed the character interaction. There's a long scene in the middle which is basically flirting between the monk (Tony Leung) and the ghost (Joey Wang) and it made me smile. Joey Wang reigns as the epitome of a beautiful Chinese ghost and Tony Leung (even though it's hard not to compare his character to the Leslie Chung's more charming tax collector) plays the role of the innocent "I must stay a virgin" monk well.
Fantasy elements embody bouts between the good guys (Leung as the little monk, the old head master monk, & Jacky Cheung's Taoist swordsman) and the tree demon, which has resurfaced 100 years after the first Chinese Ghost Story took place. Some pretty captivating things happen.... i.e. one scene has the old wise master monk knowing he'll be captured. So he utters some magic words and his ears grow long enough to curl up and shield his eyes from the evil. He also throws his staff at Tony Leung, who ends up being riding it back to the inn where they stay. And for humor, the flying staff ends up crashing into a giant gong.
The one letdown I had was the ending. While Chinese Ghost Story 1 took the heroes into hell, and #2 had them fighting a giant centipede, #3 has them going head to head with some kind of evil demon. To represent the demon, they make the inn become alive and move around but it looks mad cheap - like they decided to do a camera closeup on a hand puppet of a building. It's also pretty long, and 10 minutes of watching a building move around is pretty boring. What am I supposed to do? Close my eyes and use my imagination? A visually anemic ending to an otherwise decent film.