It's a tight race between Parts 2 and 3, but I would have to say the second installment is my favorite, despite replacing A. Michael Baldwin with James LeGros - which was not Don Coscarelli's fault, but once again the studio imposing their will.
LeGros does a great job anyway, just to be fair.
Besides that, Phantasm II is nearly flawless (nearly means, I didn't really care for the telekinesis-thingy either).
I liked the "darker" setting of this one and that it didn't feature too much comedy as Phantasm III did. Phantasm II mixes horror/sci-fi with a bit of roadmovie, which was picked up in part III and did the series well.
All in all the Phantasm movies are so very different from your average horror gorefests (personally I don't think the violence and gore in this series is particularly strong, compared to most movies in the genre)and feature more realistic and loveable characters, people you DON'T want to see killed.
The cliffhanger endings - you either like them or you don't. I think it kind of fits into the mood of the series.