"Gold Diggers of 1935" isn't as good or as fresh as "Gold Diggers of 1933", which is THE CLASSIC Warner Brothers musical of the early 30s, but it's still awfully good. It had music by Warren and Dubin, a great cast, and Busby Berkley's wonderfully eccentric direction.
Yes, the plot is silly but it struck a chord with depression-era audiences and, besides, the plots in these movies serve to just move the film along between musical numbers.
What makes this movie special is the "Lullaby of Broadway" number. This is a "dream sequence" number and is arguably Busby Berkley's greatest. Considering his track record that is saying a lot. It's the most memorable number in the movie and is widely considered one of the greatest production numbers in cinema history. I agree. I don't see how it could have been better. It's brilliant and makes an otherwise ordinary depression musical into something special.
I don't rate this as high as "42nd Street" or "Gold Diggers of 1933" or "Dames." Those films are more consistent and their plots, while silly, are less so than this one. That said, the "Lullaby of Broadway" number is better than the already outstanding numbers in the other films except, imho, the "Remember the Forgotten Man" number from "Gold Diggers of 1933."
In summary; part of this movie is as good as it gets and the rest is fine entertainment. Hey! It's Busby Berkley!