Of course the movie collapsed!
I'm no film expert... but it seemed pretty obvious that "The Man Who Killed Don Quixote" was never going to get made from the very beginning of the documentary.
In the extras disc on the DVD the cast and crew harps incessantly about how Gilliam is such a responsible director and how LiLM shows this.
Responsible? When the funding is slashed to about half of what he would like? Granted, the availability of production capital is one of those things a director has little if any control over, but to try and make such a massive film on such a modest budget was just nuts. The argument could be raised that the funding problems arose when pre-production was already so far along that they did the right thing by at least trying to make the film- but it seems that the pre-production was a mess too. Gilliam and his scouts made a very bad call in choosing that canyon as the first filming location. Not only was it a long way from the studio (so they could not switch between soundstage and location as the weather might demand), but it was adjacent to a bombing range AND subject to flash-floods. The wearhouse "sound stage" in Madrid was another less than ideal facility to shoot in. The casting of Rochefort was a huge mistake. For a highly physical role like that the only practical way to go is to hire a younger actor and make him up to appear older.
The thing that really amazed me about LiLM is how the whole crew kept deluding themselves that the movie was going to be made once things started going wrong, everybody except the 1st Assistant Director who knew that a) they had no room to deviate from the shooting schedule and b) Rochefort was unfit from day 1 to ride a horse and was going to need a long time to recover.
To my way of thinking the only way to make a film like "Don Quixote" with a limited budget would be to plan all the details out way in advance and have a backup shooting schedule so that you can keep working in the soundstage if the weather turns bad or one of the principles is not available. Gilliam clearly did not do this, was not able to do this, and reaped the results. I do not think his part in the debacle should earn him the plaudit of being responsible. If you want a responsible director look at Clint Eastwood- now there is a guy who knows how to stick to a schedule and a budget!