So you want a fantasy movie that actually IS what Delgo wanted to be?
Here's some recommendations:
The Last Unicorn
I just discovered this film. It's beautiful. The story is interesting and satisfying, if a bit weird.
The Dark Crystal
Similar to Delgo, in that a LOT hinges on the world it creates. It's a valid criticism to say that The Dark Crystal is more style than substance, and some would say that it's a concept in search of a real story. The difference is that this creates a living world, while Delgo's world is dry and disconnected. I love this film. It's a masterpiece of puppeteering that we won't see again because of today's reliance on CGI.
With Labyrinth, Henson wanted more story to go along with the world, and story-wise it works better than Dark Crystal. World-wise, not as much. Still, it's a bizzare and unique world, and once more pushed puppeteering film effects in to directions we will never be able to see the culmination of.
My Neighbor Totoro
Wow, wanna talk interesting creature and world creation? This movie is crawling with them (literally!).
I've always loved this movie, since I first watched it on the black and white TV in the basement as a kid on some Saturday afternoon to when we rented it on VHS a little later to when I rewatched it as an adult on DVD. To me, Bilbo Baggins will always sound like Orson Bean.
And don't forget The Lion, the Witch and the Wardrobe (all three versions, including the BBC version and the '70's animated version), Prince Caspian, Pan's Labyrinth (not for kids), The Lord Of The Rings trilogy (The Fellowship of the Ring, The Two Towers, and The Return of the King), along with the two other versions that were made (both interesting in their own right).
What say you?