In terms of plot, the third Zatoichi is no better than the previous two films. Cinematically, it is a vast improvement. Every shot is fantastic, and the score is as good as it gets. The change in Director really shows. Oh, and it's in colour. I do love black and white photography, but the colour adds so much in a film like this.
Like the previous film, it's a little melodramatic in places, but it works in the films favour. The lead actor is as great here as he was the last two times round, and the actor playing his master is perfectly cast. There is a lot of character development in this one. A little more about Zatoichi's past is revealed, as is his desire to leave the yakuza life, and the shame he feels for his past deeds. As someone else said, there is a great scene in which he plays a game of odds and evens. Maybe I'm just a softy, but after a scene like that I find it impossible not to rank this film higher than the previous two. I love it when villains have a change of heart. Very impactful scene. Admittedly, the character Zatoichi befriends in the first film and their relationship is stronger overall... but that odds and evens scene... Love it.
This film also has a great ending; a far cry from the abrupt ending of the previous, which felt as though they ran out of time and cut it short. I'm all for stylish abrupt endings (Sword of Doom), but the second film's ending felt almost accidental, almost as if they had an allocated time slot and were running over. This one ends with style. In fact, for a film like this I'd say it's a perfect ending (though not as good as Sword of Doom's ending, obviously). In a way it reminded me of some of the Sharpe (Sean Bean series) endings, and that non-detrimental melodrama reminded me of Sharpe, too.
I've not seen all the films in the series yet. I'm working my way through and rating them as I go, but so far Zatoichi 3 is the clear winner. Stylish and impactful.
EDIT - I'm now up to the ninth film. There have been films that surpasses this one overall, but I have to add that so far this film is still the best in terms of visuals and cinematography. Every shot is fantastic, so much so that the photo used for the actor is a still from this film.