While I wouldn't put this in the very top tier of TNG episodes, it is an excellent one. It takes about 15 minutes for the first-time viewer to get their bearings - the link between the shocking teaser and the first main act is not obvious at the outset.
But even once we "figure things out" and move on to the next repetition, the episode remains interesting. It's the nuances each time - variations in camera angle, mannerisms, sequences directly portrayed vs. those implied - that make this episode such a pleasure to watch. The solution is almost disappointing after such a clever buildup.
Besides Jonathan Frakes's superb direction - among his best in the series - I'd also single out the excellent, eerie music and Gates McFadden's performance. Despite a plot that was seemingly made for Troi the empath, the writers made the right decision and picked the better actress.