The next day Arthur and his companions come to the aid of Leondegrance whose castle is being attacked by the other knights. Arthur fights smartly and bravely. One of his opponents, Uriëns, refuses to accept him as king, even when Arthur points Excalibur to his throat, because he is just a squire. Arthur hands him Excalibur and asks Uriëns to make him knight and let him be his king, and so it happens.
During the festivities afterwards Arthur meets Leondegrance's daughter Guinevere. Merlin tries to forewarn him about Lancelot and Guinevere's treason, but Arthur only has eyes for Guinevere.

(This scene is a good example of the different layers of meaning that Boorman works with. Guinevere offers Arthur a cookie which is made according to a very old and secret recipe. Merlin says to Arthur: "Looking at the cake is like looking at the future, until you've tasted it you don't know what it's like, and then of course, it's too late." (Sound) Arthur takes a bite, still preoccupied by Guinevere who is dancing, and then of course it is too late.
Apart from the fact that this is a very comical exchange of words and glances as well as a wise truth, it is also an introduction to the next scene where Lancelot appears for the first time. But there is more: the dialogue actually tells the audience a lot about Merlin. He can look into the future, but this does not help him or Arthur any further. And apart form the future, the cake stands for something else as well, as Guinevere says: "a very old and secret ingredient", which is love. This human emotion is so old and secret that even Merlin can not comprehend it. Love will be his downfall as we learn later on.)

A couple of years later Arthur is angry because one man defeats his best knights. He decides to fight the duel himself. The knight introduces himself as Lancelot. When Arthur is about to loose the fight he abuses the powers of Excalibur to go at Lancelot. The sword breaks, but his remorse about his dumb pride, brings the lady of the lake to mend it. Lancelot will be Arthur's first knight.

Again some time has passed. Arthur and his knights celebrate victory in their last big battle. The land is one, peace and prosperity reign. By intervention of Merlin the knights form a circle, which inspires Arthur to establish the Round Table.

Lancelot comes to take Guinevere to her marriage with Arthur. He explains to her that he will love no other but her, his queen and his best friends wife. The marriage is celebrated in a Christian atmosphere. In the background Merlin meets Morgana who tells him she is a creature like him. Merlin says: "The days of our kind are numbered. The one god comes to drive out the many gods."

(Here Boorman uses the principle of "crosscutting" (jumping between two scenes, in this case the marriage and Merlin's conversation with Morgana) to enhance the contrast between christianity and druidism. He used the same technique with the scenes of Uther making violent love to Ygraine and Cornwall dying, and will use it a couple of times more.)
 

Lancelot meets the naive Perceval in a forest and takes him to Camelot where he can become a kitchen boy.
During a banquet Morgana whispers in Gawain's ear, who then speaks up and accuses Guinevere of keeping Lancelot from the court because she desires him. Arthur decides that Gawain has to back up these words in combat against the queen's champion. Guinevere is disappointed that Arthur does not defend her himself, as a king he has to be her judge, and he is king before husband.
Lancelot stays in the forest again, haunted by sorrow and pain, because in his heart he is guilty of wanting Guinevere. At night he dreams of a fight with himself and as he wakes up he finds his own sword stuck in his side.
When Lancelot does not show up for the duel, Arthur is forced to knight the kitchen boy Perceval, the only one brave enough to stand up for the queen. Lancelot gets there just in time and defeats Gawain, although the wound in his side causes him heavy pains.

(There is a lot happening at the same time here. The later grail hero Perceval is introduced and through his eyes we see the absolute high of Arthur's reign and the "city of silver and gold" Camelot. There is also a comical intermezzo of Perceval bumping into Merlin. The introduction is important because later on the two main characters, Arthur and Merlin, will be out of sight and Perceval has to take over. Seen in this light it is probably not coincidental that Perceval looks so much like Arthur.
By interlacing these events Boorman once again saves time, also by having Perceval step in for Lancelot. This is something that happens all the time in the medieval stories, one knight stepping in for the other, and the other one showing up just in time to fight his own battle. So Boorman quite brilliantly uses a medieval narrative concept to solve the cinematic problem of having only a restricted amount of time on the screen. By interlacing the events Boorman also gives the movie a natural flow. In fact the medieval chronicle writers used similar techniques.)

Lancelot's wound seems fatal until Arthur orders Merlin to heal him. When asked Merlin (who seems to doze of a lot, almost ready to leave this world) answers that truth is the highest quality for a knight. It causes Lancelot to run to the forest again, but this time Guinevere comes after him and they have their moment of pure love together.
Merlin says farewell to Arthur and points him in the direction of the lovers. When Arthur finds them sleeping innocently and naked, he despairs and drives Excalibur between them in the earth. At the same time Merlin is with Morgana in the cave of the dragon, the heart of his power. When Arthur thrusts the sword into the earth, the spine of the dragon, the cave shakes and Morgana is able to catch Merlin off guard. She worms the secret of the "charm of making" out of him and uses it to lock him in a crystal for eternity.
 

(The lovers in the forest are an allusion to the early Tristan romances. Which becomes clear when Arthur plays the role of king Mark finding the lovers in the forest and leaving his mark. The meeting between Lancelot and Guinevere is filmed as an extremely innocent moment, their nakedness is pure rather than sexual and the lovers look like Adam and Eve in paradise before the fall of men.
Interesting is the fact that Merlin defines the cave of the dragon as a place where all things meet their opposite: "the future and the past, desire and regret, knowledge and oblivion". But when Morgana says "love", one would expect Merlin to answer "hate", but he just says: "O yes".
That leads to the conclusion that love carries the opposites within itself. Apart from the idyll in the forest, love seems to be a destructive force in the movie. Uther's love for Ygraine is more like lust and greed, wanting to have it all, and Morgana uses it to avenge her father on Merlin and Arthur, Uther's son. Arthur is not capable of loving Guinevere totally because he is king first. Lancelot and Guinevere are the only ones meeting on equal terms, for no other reason than love itself.
In the medieval stories the adultery is depicted as courtly (Chrétien) as well as sinful (Vulgate cycle) (see "Legends" in the menu on the left), and this tension has been present in the Arthurian tradition ever since. Where Tennyson condemns Guinevere in the 19th century, William Morris comes to her defence (see "Pre-Raphaelites" in the menu on the left.
Boorman does not seem to take a clear stand in this discussion, he just shows the incredible force of love, and maybe gives us a hint by having Arthur say he would like to be "just a man" and meet Guinevere again. Love can flower only when the lovers are equals. Here the influence of Carl Gustav Jung is notable, who thought that power is the natural enemy of pure love. And there are a lot of power struggles going on in the story.)

Morgana bewitches Arthur, makes him think he is sleeping with Guinevere, while he is in fact fathering Mordred, Morgana's son. The birth is a black mass in which Morgana is midwife and mother simultaneously. At the same time Arthur and his knights are in church. A priest prays for protection against Morgana and her unholy child. Arthur is struck by lightning. (I am not sure what this means, whether it is God condemning Arthur, or what?)
 

The land is in need, the people are suffering. Arthur is weak, but calls on his knights to find the Grail to save the country. (Sound)
Ten years later Perceval is still looking for the Grail. He rides through the Waste Land, finds young Mordred and follows him to Morgana's place. There are a lot of (very) dead knights hanging from a tree. Morgana tries to seduce Perceval to serve her instead of the cause. Perceval resists the temptation and is hung in the tree along side the corpses. He has a vision of the Grail castle, brightly lit. From the light a voice asks him the questions: "What is the secret of the Grail? Whom does it serve?" But Perceval panics and flees. When he falls from the bridge to the castle, he falls from the tree as well, because the spurs of the knight hanging above him cut the rope.
Eight years later Mordred had grown up and comes to Camelot to demand the throne of his father. Arthur, still very weak refuses and Mordred declares war.
In the forest Perceval watches from behind a tree how Mordred and his men slaughter Uriëns. Before he dies Uriëns still finds the strength to tell Perceval never tot give up the quest. Perceval is desperate but continues and meets Lancelot, who has gone mad. Lancelot leads a group of emaciated people in anger, who beat Perceval into a stream.
Under water Perceval relieves himself of his armour. "I can't give up hope Lancelot," he says when he comes up, "it's all I've got." Once again he has the vision of the Grail Castle and the bright light, but this time (he is naked and pure) he crosses the bridge without hesitation and answers the questions. Arthur himself is the Grail-king and the secret he has lost is that the king and the land are one. (Sound)

Perceval has Arthur drink form the cup and reveals the secret the king has lost. Arthur awakes from his lethargy and rides out with his faithful knights. (Sound) The land flourishes as well, and blossoms again.

(Here the Grail is not the christian Holy Grail, Boorman returns to the old Celtic notion of the king being responsible for the fertility of the land.)

Arthur visits Guinevere in a monastery. He forgives and asks forgiveness and she returns Excalibur, which she has kept safe after the episode in the forest, to him.
On the night before the battle Arthur has a vision of Merlin. (Sound) This frees Merlin from his imprisonment. As a "dream-body" he walks into Mordred's camp and finds Morgana in her tent. He gets her to use the "charm of making". The effort costs her the beauty and youth she managed to maintain all those years. When Mordred finds her as an old woman he strangles her.
The fog released by the "charm of making" is in the advantage of Arthur's army because they are the minority. Their bravery and the return of Lancelot to Arthur's ranks keeps the armies in balance and they destroy each other. Arthur forgives Lancelot before the latter dies of the old wound in his side.

The end.

(Boorman, like Jung and Joseph Campbell, believes that every great myth marks a turning point in the history of mankind. And in his conception of the Arthurian story it is interpreted as the coming of consciousness. Uther's world is chaos, disorder, an entanglement of unbound emotions.
In contrast Arthur's world is orderly, his laws are rational. However, Arthur's Camelot is still connected with the powers of the unconscious through Merlin and Excalibur. For a while these two, ratio and the unconscious, are in balance and the result of this union is the golden age of Camelot.
But this golden age is not to last. Merlin, the representative of the unconscious, seems to get tired and the events, which he can not control, lead to disharmony. Arthur is unable to deal with his emotions when he finds Lancelot and Guinevere together and contributes to Merlin's final imprisonment by thrusting Excalibur into the spine of the dragon. Ratio and the unconscious are separated and the result is a Waste Land.
On this level the Waste Land also symbolises the modern, rational world in which we live in (like in T. S. Elliot's poem). It is as if Boorman is telling us we should be much more aware of the unconscious in order to be in harmony with ourselves and the world we live in. And where is the unconscious to be found? According to Jung (and others) we should study our dreams, which is exactly what Arthur does, he wakes Merlin by dreaming of him. And from that moment on Merlin is "a dream to some and a nightmare to others" and his magic is accessible to all.)

A lot more could be said about the movie. Different angles of looking at it will result in different interpretations, which by no means have to contradict each other, but will just prove how rich Excalibur really is.