His plots aren't all that bad. His screenplay (especially dialog) is weak, and his directing is of a very specific style that only works with certain kinds of actors. It is both those things that hurt the prequels.
As far as directing, Lucas is a hands-off director. He doesn't give the actors feedback or direction - he expects them to bring the characters to life and flush out the nuances on his own. So what he'd do is shoot a scene over and over, even though the actors thought they got it perfectly right, until some nuance or personality came out that seemed more natural and unique. He always said he did his directing in the editing room - but to do that he needed a big pool of material to work with to pull the good stuff out of. With Hamill, Fisher and Ford, they had the talent, energy and personality to simply bring the characters to life. Do you think we liked Han Solo so well because Lucas directed Ford to be that exact character? Or Princess Leia being such a strong female lead and showing playful disdain in the harsh tone of her voice towards Solo? Lucus just stepped back and let them create.
That directorial style worked well in American Graffiti too. Like the liquor store scene. The robber leaves the store and throws the bottle of liquor to Terry. They shot it over and over, and every time he caught it perfectly. Until finally, he turned around too late and just barely caught it with the tips of his fingers. That was what Lucas was waiting for, and that's what made it in the movie. At the very beginning, where Terry runs his Vespa over the curb and hit the wall - total accident, but Lucas kept the cameras rolling and that made it into the movie.
So when it comes to most kids, like Jake Lloyd, they NEED coaching and prompting and directed. I strongly believe that Jake Lloyd was awful in Phantom Menace because of Lucas' directing style. When I watch him in other movies, like Jingle All the Way, I'm reminded that he was pretty talented for his age - Lucas just didn't bring that out because he just sits back and watches with no obvious emotion or constructive feedback.