Like "PaulD" I too remember this from when I was a kid. I was a bit older though at 10, but it still made a powerful impression on me. I watched the film "Paperhouse" a few years ago, and it didn't ring the same bell. But now the original has finally been re-released, and I can finally see what scared the pants off me all those years ago.
And it didn't disappoint. Although the directing is not what audiences today are used to (very long takes, slow pans across rooms), the children are good actors and there are some genuinely startling moments in there. The effects aren't great, but then they don't have to be. There's no need for flashy CGI or even primitive CSO, as this programme is all about atmosphere. The world of Marianne's dream is a house on a moor, dark and musty, with cobwebs on the wooden stairs, and (like all dreams) there is a sense of lurking menace from the very beginning.
We didn't have a colour TV when I watched this, so I'm not missing anything by this release only being in B&W. In fact I can't see what colour would add. Most people appear to dream in monochrome anyway.
I think the best recommendation is that I watched this with my 11-year old son. Brought up on a diet of Star Wars, new Doctor Who, and SpongeBob, I thought he'd be bored, but he genuinely enjoyed it, and at some points was actually scared ("...a little bit.").
"Not The Light! Not...The...Light!