This film is noteworthy as the first feature film produced by a high school that got wide distribution. Recently I saw that they've done a DVD transfer, so it is no longer only available on videocassette. It may be hard to relate to modern audiences, but what you have to remember is that this film was made in the 70s, when foreign monster movies were ubiquitous on TV and in the theaters. The Milpitas Monster is better understood as a parody of the monster movie genre: the acting is intentionally over-the-top (by the principals) or wooden (by the many non-actors in the film, such as the actual city mayor), and all the dialogue in the film was dubbed to be slightly out of sync to parody these movies. Sure, it also parodies "King Kong" to some extent, but the primary target was the movies which everyone knew from "Creature Features" and the double features at the local movie house.
The film has additional historical interest for people familiar with the Bay Area, as it provides a detailed snapshot of what the South Bay (and particularly Milpitas, of course) looked like 30 years ago: lots of open space, an airport, a traveling carnival, and no sign of the cultural diversity for which Milpitas has since become famous. It's astonishing how much change can happen in one generation.
If there's any problem with this film, it is that it tries to do too much: environmental message, parody of monster movies, love story, demonstration of civic participation in a school project. As a result, it is possible for people to mistake it as a serious film, rather than as the comedy it is intended to be.
Review by harold-ogle from the Internet Movie Database.