For once thing, once they'd cast Harris and Redgrave, it wouldn't do to have a supporting player who could actually sing! For another, Goulet always had an unbearably smug, smarmy presence, and wasn't very good-looking. There's a reason he never became a movie star.
For another, Goulet was 34 in the days of "Never Trust Anyone Over 30", and Nero was young and hot. His age and good looks work both in terms of basic story, where he's supposed to be virginal and rather innocent when he comes into the story, and in terms of the zeitgeist that the director was trying to capture. It was the late sixties, the time of the "Youthquake" and the Mods and the Hippies and the Revolution, and Guenivere was re-imagined as a bit Hippie-ish, with a bit of a Generation Gap between Arthur and Gwen and Lance. Which wasn't a bad idea, although of course it didn't work any better than anything in this disastrous movie.
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