One Thousand and One Nights belongs to the early era of anime, and broke ground in two directions, establishing animation as a possible medium for both mature content (there's a lot of sex) and serious artistic expression. It may be a bit of a leap to attribute all of the great animated films that rise above meaningless kiddie fare to this weird counterculture mash-up, but it certainly suggests that the idea of animation for adults is nothing new. But maybe all of this is expected in a film that Osamu Tezuka, who did the work of several lesser geniuses in his lifetime, had a large hand in creating.
One Thousand and One Nights is a largely impressionistic film -- there is a plot, but it's meandering and kind of meaningless, a very loose adaptation of the Arabian Nights. The animation frequently veers into the experimental, such as incorporating live-action shots of the ocean, or the downright non-representational, such as a polygonal love sequence. Other sequences are just delightful off-kilter cartoon mayhem, like a ridiculously involved duel between wizards. The influence of 60s counterculture is obvious, but I think New Wave cinema is also an inspiration here.
The most obvious flaw is one that will make a lot of people turn away instantly, which is the rather blatant racism and sexism, best exemplified in the crude Arab caricatures. (On the other hand, Disney's Aladdin was pretty racist too, and everyone loved that.) It's also a baggy film, with its 2+-hour running time unheard of for anime, and there are undeniably some parts where it drags. But for the most part it's easy to get caught up in the groove of the film, driven by psychedelic music and images as well as an irrepressible sense of play. And that groove is a very fun place to be. On top of that, any fan of animation owes it to themselves to track down this strange and forgotten gem.
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