Need know movie (80's - 90's) with floating slime ballls and kids sliding into mud?

Hi. I vaguely recall a film from the late 80's to early 90's. I believe it started with kids chasing a leprechaun and following him through a rainbow portal to a strange world where kids would slide into a mud like substance and a large muddish ball of slime would float out of the slime, presumably a transformed kid. They were called "mooglies' or something like that, I think.There was a queen and some sort of parade, too. Thanks!