It's an old kids fantasy movie. It has a nice leprechaun,a boy and a girl. They go to stay at a familys members house out in the country where the end up on a small river boat with the lepr. And go to a magical place where people jump into this "hole" and come out these beautiful "animals".(dressed up of course,not literally an animal).

Sounds like The Great Land of Small (1987) (http://www.imdb.com/title/tt0093116/)

Omg! IVE BEEN LOOKING FOR THIS MOVIE FOR 10 YEARS!! Sorry about caps I am just so excited! I can not believe someone else actually remembers it. My family thought I was delusional. I am so glad I went through twenty pages of questions just to find this one!