Yes, the movie is not at all faithful to the book. Yes, it has a cheesy plot, low-budget cinematography and 19th century special effects. But none of these things can take away from the charm of this picture. The acting is simple and the actors are adorable (young Abdulov rocks!). Many of the lines from the movie have since become everyday phrases (eg: "Nu ktozh tak stroit!") and several of the songs immortal ("Pesenka pro kostyumchik," "Tri Belix Konya"). And the sentimental value of the good ol' Soviet rudeness and bureaucracy is immeasurable.
If you understand Russian, have spent any time in USSR, and love fairy tales for adults, you'll love this movie.