I think we need to get the cartoon image out of our heads. Think of this production as uniquely different (yet similar to the movie) costumes (a la Lion King, without the puppets and in a different style). Think of a regular medival set design.
I think the STORY could be told better on stage. DON'T make it a full out comedy. DON'T include every fairy tale character. Keep it simple and tell the story. Lord Farquoi (sp?) could be evil without the John Lithgow humour.
"The Spectacle has, indeed, an emotional attraction of its own, but, of all the parts, it is the least artistic, and connected least with the art of poetry. For the power of Tragedy, we may be sure, is felt even apart from representation and actors. Besides, the production of spectacular effects depends more on the art of the stage machinist than on that of the poet."
--Aristotle