Disney definitely should have put it in with the suggested seamless branching--BUT I personally think there is a certain amount of excessiveness in the extra length that isn't required to love the film...particularly for younger viewers.
I'm not entirely convinced that kids won't sit through long movies. Avatar, the highest-grossing film of all-time, is three hours long, almost long as the previous record-holder, Titanic. At one point, The Godfather was the record-holder, and before that it was The Sound of Music, which in turn replaced Gone With the Wind. All those movies are longer than 139 minutes.
As for specific things that are better in the longer cut, "Eglantine" is just warming up in the theatrical cut when it ends abruptly after its second chorus. All the stuff with Miss Price's pointed response to Mr. Browne, particularly when she sings "I have always had a bit of a knack for witchcraft," is gone. Even the visual imagery reinstated to "Portobello Road" adds depth to the characterization; Miss Price rejects the fancies and fineries of ages when Mr. Browne puts them on her, but Carrie loves them. Cutting out most of Mrs. Hobday's scenes was even more detrimental than doing the same to Roddy McDowall's. The relationship subplot is more credible with the initial meeting between Mrs. Hobday and Mr. Browne included. It makes one understand his fear of commitment, especially to a woman he's just met. And without "Nobody's Problems For Me," Miss Price seems not to be affected by Mr. Browne's departure in any way. It's a beautiful, beautiful song, but apparently it got cut before anything else did, and while the fact that the orchestra track is a re-recording is obvious, Disney Magazine claims Irwin Kostal did the actual orchestrations. Some people at the studio seemed to have a bias against ballads, at least in Richard M. Sherman's opinion. Yet those often ended up being the ones that got submitted to the Oscar nomination committee.
Radio City Music Hall has gotten most of the blame for the cuts, but the studio didn't put up much of a fight. And would the Music Hall really give up a Disney film even if the studio had stood their ground and tried to call their bluff? And then there's the fact that they made even more cuts in 1979, after they stopped regular film exhibition because their G-only policy backfired on them. Interestingly enough, the attraction for Christmas 1972 was 1776.