How bad is it? It's the worst cartoon comes to life film.
Should you see it? No. Skip the sequel [Terror Toons 2 (2007)] as well.
There are a lot of films that try to combine a cartoon world with real life (well, life as portrayed on film), most painting cels on live action; this one substitutes costumed characters for cartoon characters. This one has kids putting a DVD in a player, finding a special function that brings the cartoons to life and then things get violent. The costumes the characters wear look like bad Halloween costumes, the sound effects and graphics are terrible even for the low budget and the plot is idiotic and poorly edited. There's a disco dancing scene, there's strip Ouija, and there's beating up Satan - all of which sounds more entertaining than it is.