With films such as this, I tend to refer to my children's opinion as much as mine because it is of course a DVD I bought for them to watch (they are of infant and primary school age). We've had it for over a month and I measure its worth by the number of times they want to watch it - which I've long since lost count of! We have most of the 'inevitables' in our collection, from Toy Story through Monsters Inc, all the Shreks, Finding Nemo, both Ice Ages and many many more, and Underdog, while being slightly different in not being an animated film, has proved just as popular. It's a U certificate so there's no need to worry about any element of it that might not be suitable for a 5 year old. Children love animals of course, and this film combines a lovable dog with a sharp, funny script that adults will enjoy too (or should).
It looks to be a massive improvement on the original comic strip on which it is based, which I think was televised in the 1970s or thereabouts. For what I wanted it to do - to make my children laugh and keep them watching it repeatedly - it delivers the goods completely and while it's not a timeless classic in our DVD collection for kids, it's a worthy inclusion and I personally recommend it.