This is very unusual and awkward for a Nicktoon as it features a small boy around Timmy's age being killed on screen (Arthur, when he was transformed into a muscular super hero, but he is brought back to life moments afterward).
This episode reveals that Dragons are immune to magic.
Strangely in one episode when Jorgen is reading Da Rules, he says it says no wishing someone back to life yet Timmy clearly wishes Arthur back to life though that rule may have been placed because of what happened in "That's Life!" (which occurs after this episode).
Bugs Bunny - The title, Knighty Knight, is an allusion to the cartoon, Knighty Knight Bugs.
Top Secret! - The running gag of Timmy's parents walking around in a two-person cow costume is very much like a similar gag occurring in this 1980s war/spy parody film, when two members of a resistance team go undercover as a cow to infiltrate an enemy base.
Someone asks their magical companion(s) to help them slay the dragon, only for them to tell them dragons are impervious to magic.
Whenever Merlin uses his "magic", he throws magic dust on the ground but it only does a poof cloud and nothing else.
Merlin and Arthur find a magical item, but Timmy takes it before they can, thinking it's something else.
In the title card of this episode, the handle on Timmy's sword changes from dark gray to light gray when the "Directed by" text appears.
The date of the Camelot Fair suggests it has been held annually for around 600 years. Longer than the discovery of America in 1492, let alone the founding of Dimmsdale in 1665. Also, the legend of King Arthur takes place in the late 5th and early 6th century.
Additionally, Merlin is stated to be King Arthur's uncle, which was not in the original story.
Comcast's summary states that the dragon's master want to cast a spell on Cosmo, which never happened in the actual episode.
A similar thing happened to Fios description of the episode, saying it was Vicky.
The dragon farts a few times in the episode. This should not be possible however as dragons use their gas to breath fire.
Timmy: The knight's short, the wizard is a salesman, the dragon's fake... AND... people are throwing manure at us!