I’ve been trying for 15 years to find this! Movie was early to late 80’s vintage and was aired on live TV in the afternoon or evening, definitely in English, and in color. Most of the settings and environments were in subterranean lairs and caves underground.
I remember the characters being mostly puppets, like strange creatures or trolls, but it may have been mixed with live action. It was definitely not animated. My memory is very fuzzy but it may have had magic and king/queen/prince/princesses involved.
When I first started looking for this I thought for sure it was Jim Henson related but from my research was not.