There is at least 'some' accuracy to Scott's movie, but a number of innaccuracies. The accurate stuff includes:
1) Yes, the Muslims were generally quite tolerant towards Jews and Christians, and the Muslim forces were quite kind and magnaminous towards the Crusaders especially after defeating the Crusaders.
2) Yes, the Muslims did have superior technology and education, when compared to the crusaders. Much of that Muslim science and technology made its way into Europe through Spain, which was under Muslim rule for hundreds of years.
3) Yes, the "Saracens" (Muslims during the Crusades) are the ones who were the final victors in the Crusades, defeating the Crusaders and sending them back to Europe.
The inaccurate stuff includes the following:
1) Saladin is depicted as an "Arab". Though he led Arab armies, he himself was a Kurd. Kurds are a Muslim people of Aryan descent. Saladin was more likely an Aryan, not a Semite (Arab). The original Aryan homeland is Afghanistan.
2) Saladin's forces are shown to be in large numbers. This is false. Saladin's forces were always smaller than the Crusader forces. Compared to Europe, the middle-east has been a relatively sparsely-populated region. Europe has always been more densely-populated, and this was the reason that Europe had large armies that swarmed over lightly-populated Palestine
3) Saladin's forces are shown to be using large numbers of forces to defeat the Crusaders. This is false. Saladin's forces were usually at a disadvantage in numbers when compared to the Crusaders. The only thing that saved the Muslim forces was the fact that they had superior tactics and generalship and superior technology.
4) King Richard of England is pretty much absent in the movie. The truth is, that Saladin and Richard fought and King Richard was defeated. He was taken prisoner by Saladin.
There are other innaccuracies, but they are too numerous to mention here.