Do you need background knowledge to appreciate this?

no

Not really. I knew nothing about the director of Dolemite, but enjoyed the movie. Both movies are sort of similar.

There some minor things that knowing some of Wood’s work would help. For example, the farmer says he wants the movie to end “with a big explosion” despite the fact that the climax is already an octopus fight. This is a nod to the real movie, which suddenly ends with stock footage of an atomic bomb that has nothing to do with anything.

I'd barely heard of him and loved the film. It might help if you know who Bela Lugosi was, or maybe saw a few horror films from the '40s and '50s, but this film is pretty much self-contained.

It's a fantastic movie, one of my favorite Burton films and bio-pics in general. I saw it in the theater when it came out and while I was a fan of schlock cinema I had never seen an Ed Wood movie. But after seeing some of Wood's films later and watching Burton's film again I enjoyed it even more. I recommend both this and if you like hilariously bad movies Wood's are must see.