You have to feel for Tobe Hooper. There's an argument for casting him as the Orson Welles of horror cinema, a director who made such a splash with his breakthrough film that everything he subsequently directed ended up being unfavourably compared to it. Everyone wanted another Texas Chain Saw Massacre, but there just can't be one. This was the sort of career-launching one-off that could only be made by a young newcomer, one armed with the sort of bravery and vision that the film industry does its damndest to subsequently strip you of. Witness the tardy sequels, the first of which Hooper directed, and the stodgy remake for confirmation.

Following rumours of a Spielberg overthrow on the 1982 Poltergeist and a bungled remake of Invaders from Mars, most of Hooper's subsequent work has been confined to TV, directing episodes from the likes of Tales From the Crypt, Amazing Stories, Night Terrors, Masters of Horror and a slew of others. When he has intermittently returned to movie making, such as with the 1993 Spontaneous Combustion and the 1995 The Mangler, the brickbats have landed with considerable force. It's too easy to forget that in his pre-Poltergeist days, Hooper was still a director who commanded genre fan attention. Following the commercial misfire of his second feature, Eaten Alive (which is still well worth a look for dedicated horror enthusiasts), he directed two films that showcased his ability to produce standout work even within the confines of convention. The first was the 1979 TV movie Salem's Lot, one of the most enjoyable of all Stephen King horror adaptations. The second was the 1981 theatrical feature, The Funhouse.

Putting teenagers in peril and systematically killing them off in creative fashion was still popular in the early 1980s, and a superficial reading of The Funhouse would certainly paint it as being part of this cycle. You'll only need to have seen a handful of genre films from the period to recognise a few of the touchstones here. Teenager Amy Harper is off for a night out at the local carnival with her friends Buzz, Liz and Richie, despite warnings from her father to steer clear of the place. It is, after all, the same carnival where they found the bodies of those two little girls when it went through Fairfield last year, he reminds her, a bit of exposition that's more for the audience than his presumably well-aware daughter. Amy and her friends go anyway and have a real good time, but to complete the evening decide it might be fun to spend the night in the carnival's funhouse, which Liz suggests will give Amy, who's first-dating the hunky Buzz, a chance to finally lose her virginity. Once the carnival closes, the four get down to business, but are disturbed when the deformed son of the funhouse owner kills carnival fortune teller and part-time prostitute Madame Zelda (Sylvia Miles) in the office located directly beneath where they have chosen to hide. Figuring it might be time to get the hell out of there, a moment of clumsiness betrays their presence and a deadly game of cat-and-mouse between them and the funhouse owner begins.

All of which sounds like the formula for a standard 80s slasher flick, with thrill-seeking teenagers ignoring the advice of their elders and ending up being stalked by a monster, while the virginal female is destined to escape death while her more promiscuous, pot-smoking companions perish. But there's more going on here than meets the synopsis, and The Funhouse differs from that particular genre standard in a number of significant ways. The characters and plot are certainly established along traditional lines, but Hooper then plays some interesting games with convention. For a start, despite being comprised of the stock quartet of tart, virgin, wisearse and jock, his teenage protagonists are a likeable group and pleasingly underplayed, at least when compared to the genre standard. Elizabeth Berridge in particular makes for the most sympathetic heroine this side of Jamie Lee, while as the muscled-up Buzz, Cooper Huckabee kicks against expectations by suggesting there's a decent guy underneath his swagger. You actually don't have an urge to see these kids killed.

The monster, meanwhile, despite its grotesque appearance (courtesy of makeup wizard Rick Baker) and brief fits of uncontrolled anger, is both humanised and humiliated, and for the most part proves to be sheep in wolf's clothing, a living funhouse exhibit whose function is primarily to terrify rather than attack the teenagers – when he does kill it's always the result of provocation. It's the creature's relationship with his father (played by the splendid Kevin Conway, the unnerving face of every barker in the carnival) that provides the most direct link to Texas Chain Saw, a bond of blood that transcends issues of morality and proves considerably stronger than the fragile ties of friendship on which the teenagers have to rely.

Such generic disruption is used by Hooper as the basis for an intriguing exploration of dual notions of screen horror, with the safe, artificial and marketable elements repeatedly undercut by a darker reality that lies beneath. This is brilliantly captured in an opening sequence that lingers on a plethora of genre memorabilia, then directly parodies iconic imagery from Halloween and Psycho, and concludes by forcing the innocent Amy to confront an ugly image of her own monster within, her face frozen by Palaroid photo in a distorted portrait of hateful rage. The duality is followed through in a creature whose horrific true self is hidden beneath the almost comically cheap costume of the Frankenstein monster, and in the funhouse itself, whose contents are initially the source of mocking amusement but develop an aura of childhood nightmare once the killing begins.

Hooper delights in the lights and music and sometimes surrealistic potential of his carnival location, clearly having a particular affection for the animatronic marionettes that populate the opening credits and provide creepy, key moment cutaways. It's the same story for the supporting cast, which is sprinkled with whacked-out oddballs included solely for texture, the star turn coming from early De Palma favourite William Finley as eccentric, drink-swigging magician Marco the Magnificent.

There are a couple of narrative dead ends – younger brother Joey's covert trip to the carnival appears staged largely for us to enjoy his confusion at his sister's disappearance and to set up a can't-hear-the-shouts scene when his parents arrive to collect him – and the scare factor has inevitably been diluted by our familiarity with the formula and films it toys with. But in other respects, The Funhouse has stood the test of time well. Its narrative energy, restrained performances and visual and thematic richness give it both longevity and replay value, while its effortless eccentricity and flashes of black humour qualify it as vintage Hooper, his last such work before being swallowed by the Spielberg machine.

At last. After many years of suffering the cropped 4:3 VHS version finally we finally get to see the film presented as it should be – 2.35:1, anamorphically enhanced and looking great. Contrast, detail and colour are all rather lovely, and black levels are bang on without loss of shadow detail. There is some visible grain in places, but it's never intrusive. Even saturated reds and blues look good.

The soundtrack is Dolby stereo 2.0 only, but it's a clear one with a decent dynamic range and distinct separation in places.

None. Always a shame.

An old favourite that still holds up and acts as a useful reminder of how in tune with the horror genre Tobe Hooper was and how much fun he could have with it given the right material. As for the DVD, well the extra features cupboard is empty, but the transfer is what fans have been waiting for, so I'm happy enough.