Terry Gilliam's movies are original, outrageous and uncompromising - fantasias that giggle in the face of formula predictability. You'd think that would make Gilliam the least employable man in Hollywood, but the studios keep giving him money, despite the rows that inevitably result. Donald Clarke hears the director's take on his battles with the fearsome Weinsteins over his latest, The Brothers Grimm

Terry Gilliam, director, animator, cartoonist, radiates the deceptively healthy glow that only a hangover can confer. We are meeting for lunch at a Covent Garden hotel and the menu seems packed with just the sort of exotically flavoured stodge he needs in his condition. Look here, boar and suet pudding. His eyes swivel nauseously and he makes damp noises with his tongue. Just the risotto, then.

In fact, Terry looks healthier than any 64-year-old who has spent the last 30 years squabbling with Hollywood dunderheads has any right to look.

He is comparatively trim, the skin round his neck is taut and his eyes. . . . Well, actually they do look a little bleary. It seems that Gilliam spent the previous night knocking back wine with Terry Jones, his old chum from Monty Python's Flying Circus. So the surviving Pythons - Eric Idle, John Cleese, Michael Palin, the two Terrys - still get on together?

"Well John and Eric live in California. So we don't see quite enough of one another. But Terry and Michael and I all live within a few minutes of one another in north London. So that's all very cosy. I really don't do this sort of drinking too often. Maybe once a year. Oh dear."

Gilliam has spent the last three months promoting his new film, The Brothers Grimm, all over the world. As with so much of the director's work, this strange, slightly chaotic fantasy flick had a difficult birth. The picture - in which Heath Ledger and Matt Damon play twisted versions of the 19th-century German storytellers - was made for Bob Weinstein's Dimension films. Right from the beginning, Gilliam felt that the famously volatile egos that drive Bob and his brother Harvey might not form a happy combination with his own uncompromising approach to the business.

"I said: 'Look, Bob. This might not be a good idea. You are who you are and I am who I am. We have become quite successful doing things our own way. We are both very pig-headed. This really might not work.'"

Terry Gilliam knows about friction. He had a stand-up fight with Universal in the mid-1980s when that company tried to impose a happy ending on his wondrous Brazil. He had an even more horrible time making the ruinously expensive The Adventures of Baron Munchausen in 1988.

At least those films got made. As anybody who has seen the heart-breaking documentary Lost in La Mancha will be aware, Terry didn't even manage to make it into the second week of principal photography on his quirky Cervantes adaptation, The Man Who Killed Don Quixote.

With the inevitability of a big cartoon foot descending on any animated beast foolish enough to hang about the Monty Python opening sequence, The Brothers Grimm turned out to be yet another troubled production. Even before shooting started Bob and Terry were squabbling. The director wanted the British actress Samantha Morton as his female lead. Harvey and Bob did not. They eventually settled on the ho-hum Lena Headey.

"The thing is, I don't normally have these fights right at the beginning of the production," he says. "I am normally not fighting about key things like casting, lighting, make-up and so on. Here I was and that made me very angry. If you are fighting at that stage, then by the time you come to actually shoot the film you are exhausted."

Gilliam chuckles his way into a little tirade.

"I have never understood why they didn't want Samantha. Everybody wanted her: Matt, Heath, everybody. I honestly don't know why they insisted. I think it was just a way of saying: 'I am the boss.' Now, I react very badly to that, because I am the boss." He emits his trade-mark helium chortle.

"If there was a logic then nobody put it forward. What are they talking about? When that battle became public, it then became something that Harvey just had to win. But it is so hard. It is like trying to create a painting and somebody telling you: 'Oh no, you can't use cadmium blue. You can't use burnt ochre.'"

The squabbling continued long after the end of photography in 2003. The Weinsteins wanted the footage cut into one sort of film, while Terry wanted another. Even now, the director declares himself baffled as to what exactly Bob and Harvey were up to. Eventually, exasperated by the pointless head-butting, he sloped off to shoot Tideland, a low-budget film about a young girl's attempt to deal with the death of her mother from a heroin overdose.

"I had reached the traditional point where money and talent weren't agreeing. I told the brothers that I thought we had made a good film, but that I just didn't know what they wanted from me anymore. So I will just go off and make this film. If you are up against a bruiser, the best thing to do is just not fight. Just run away. That's what I did."

Despite all the ructions, Gilliam remains stubbornly proud of The Brothers Grimm. While promoting the picture he must bump into Bob and Harvey. How are relations? "Oh we are the best of friends," he says with uncharacteristic archness. "But I would say the chances of our working together again are slim."

John Cleese, who first met Gilliam in the 1960s when the young American was drawing cartoons for Help! magazine, has a theory that his old friend rather enjoys stirring up turmoil. Terry Gilliam was born in Minnesota and lived there until the age of 11 when his father, a carpenter, moved to Los Angeles.

I get a sense that, as a young boy, he gambolled in wooded glades. Where were all the traumas and emotional disasters artists require to form the sensitive temperament? "My childhood was a bit like that," he laughs. "That used to make me crazy later. I want to be an artist, but I'm not crippled, I'm not blind, I'm not poor. You need that. That's why I moved to New York. I had to poke out my own eye and live in poverty for a while. I had nothing to rail against, because life had been very pleasant. John has this theory that if you fight for something you begin to understand the value of what it is you are fighting for."

Gilliam claims, with apparent seriousness, that he left America because, enraged by the Vietnam War and the other injustices of the day, he felt that he might end up throwing bombs about the place. "I felt very rebellious. But people get hurt in rebellions and I just didn't want to hurt anybody. I thought it would be healthier to be a cartoonist."

After moving to London, Gilliam secured work drawing cartoons for the TV comedy series Do Not Adjust Your Set, which also featured Jones, Palin and Idle. Later he was asked to create some animated material. With a £400 budget and two weeks to do the job, his only option appeared to be to cut and paste illustrations from books and magazines to form mobile comic collages. Thus the Gilliam style was born.

When the Monty Python team came together in 1969, Gilliam became its only overseas member. In retrospect his animations - killer prams, that big foot, kissing statues that turn into musical instruments - now seem the most consistent element of the show.

"We always felt part of a team, even though everybody would be off writing in their groups and I would be on my own. We would always meet and try and fit things together. We were always trying to fire off one another. Every now and then when I got bored I would put on a silly costume and do something. I had the most freedom, but I couldn't quite articulate what I was doing. I still don't know why it worked, but it did."

The first proper Python film, 1975's Monty Python and the Holy Grail, co-directed by Jones and Gilliam, is fondly remembered for shrubberies, limbless knights and killer rabbits. But Gilliam, who confirms that the visual style was largely his responsibility, managed,with no real directing experience, to make a low-budget film look surprisingly lavish. Many of the Gilliam trademarks are already in place: an interest in grubby antiquity; wild flights of fancy; an enthusiasm for characters with awful teeth.Unlike every other contemporaneous television spin-off, this looked like the work of a real film-maker.

Jabberwocky (1977), a very Pythonesque Lewis Carroll tribute, was less successful. But the wonderful children's fantasy Time Bandits (1981) has rightly come to be seen as something of a classic. It is remarkable that Gilliam was pulling off such technically complex work when his only training involved watching Ian MacNaughton direct the TV series with light-entertainment competence.

"I just kind of knew how to do it," he says. "It was like when I was doing airbrush; I just picked up a brush and knew how to do that. It is like a musician picking up an instrument."

Many have suggested that if Gilliam had been as talented a diplomat as he is a director then he might have had a much easier life. The pressure he suffered during Brazil, a wildly imaginative dystopian nightmare, was so great that he briefly lost the ability to walk. Eventually he became so furious at Universal's refusal to release his version of the film that he placed an angry advertisement in the trade paper Variety: "Dear Sid Sheinberg. When are you going to release my film, Brazil? Terry Gilliam."

Sheinberg, the executive in charge, eventually gave in, but the incident surely did not endear Terry to the power elite. Did he ever regret that move? "No. That was the one time I did something right in my life. The film wouldn't have been released. They hated the film and all they wanted me to do was change the ending."

An undertone of outrage highlights the implied irony. "What's wrong with that? Why wouldn't I do that? I am happy that I didn't have an agent to calm things down. That was a fight I was waiting to have for 20 years. I hate the studio system."

Despite all the firefights, Terry Gilliam does still manage to get films made (The Fisher King, Twelve Monkeys and Fear and Loathing in Las Vegas followed in the '90s). He maintains that his reputation for attracting disasters is exaggerated - "I think the reason is I talk too much about it. Other directors have those disasters and keep quiet." But the reputation is still there. How on earth does he manage to convince producers that this time things will be easier?

"Well, I am not the person in these stories you hear about me. That's the first thing. I think my enthusiasm eventually wins them over," he laughs. "I am bubbling about the film and I am genuinely excited. You know the hardest thing to do in Hollywood is burn bridges. There is usually some sucker who still likes me. There is usually some sucker who will still work with me."

Gilliam has yet to find such a sucker to work with him on his second attempt to film The Man Who Killed Don Quixote. Five years after weather, illness and under-financing killed off the last production, he has nearly regained the rights to the project and, if the money comes his way, will happily launch himself back at the windmill.

In the interim he has directed two films (Tideland and Grimm) as well as that extravagant Nike advertisement in which famous footballers have a kickabout on an oil tanker. He and his wife, the make-up artist Maggie Weston, live in a 17th-century pile in Highgate, one of whose rooms, moved as a unit from another building in Great Yarmouth, belonged to Oliver Cromwell. It sounds like a good life.

"I go upstairs to the top floor. That is where my computers all are and that is where I spend my time. Actually I am beginning to wonder what I do up there."

He suddenly becomes animated. "But I got my Freedom Pass this year." The document that gives OAPs free access to London Transport? "Yes. It's fabulous I finally have something from life. It's a great idea: you pay all your taxes, you live life, and finally you get this reward. I have a bus pass!" His excitement seems to have scared off the hangover for good.

The Brothers Grimm opens today