Some background. The Merchant of Venice can be read as sympathetic to Shylock, and certainly gives him some of Shakespeare's best lines. But any reading of the play should not disregard that it is a comedy, an elaboration of the Comedia del Arte framework. This is especially true given the use of gender-crossing disguises, and the manner in which Portia and Nerissa delightedly turn the tables on their husbands. As such, the play needs a chief villain, and Shylock is used for that purpose.
Shylock is given many of the stock tropes of the villainous Jew in the text. For example, his chief complaint with Antonio in Act I Scene iii is that Antonio lends out money for no interest, driving down usury rates for all of Venice. But he is also the target of much more abuse than is typically leveled at a comic villain, some of which gives him occasion for the famous lines in Act III Scene i:
Hath not a Jew eyes? Hath not a Jew hands, organsHowever, it would be a mistake to read Shylock as anything other than the villain in this story. This is clearly shown in the courtroom scene; Shylock, having insisted on his cruel justice, is hoist on his own petard by the clever Portia, and under threat of execution pledges his belongings to his daughter and her Christian husband upon Shylock's death. As well, he assents to baptism; the structure of the scene leaves no doubt but that this is meant to be a joyous conclusion to the conflict.
dimensions, senses, affections, passions; fed with
the same food, hurt with the same weapons, subject
to the same diseases, heal'd by the same means
warm'd and cool'd by the same winter and summer
as a Christian is? If you prick us, do we not bleed?
If you tickle us, do we not laugh? If you poison us,
do we not die? And if you wrong us, shall we not revenge?
For whatever reason, rather than sinking into obscurity along with so many of Shakespeare's plays, The Merchant of Venice has remained popular even as its portrayal of Shylock becomes more discordant. Indeed, for over a century it has been the fashion for actors to demonstrate their skill by turning Shylock into a fully rounded character. That this is possible speaks to Shakespeare's skill as a crafter of villains.
But Al Pacino's production goes completely overboard. It is foolhardly to turn a comedic villain into some sort of hamhanded demonstration of the evils of anti-semitism. The first two minutes of the movie are especially sickening, being essentially an exercise in overly self-aware flagellation: "Oh look, we're being so unflinching by exaggerating the meaning of anti-semitism in the story!" Worst is that in the process, they bring up in passing a much more terrible affront to Judaism than a simple comedy, the burning of the Talmud in Italy. That they dare to link this national tragedy to a story of a vengeful usurer is contemptible.
Aside from that, on the purely artistic level the movie did poorly. Scenes were dragged out unmercifully, especially the courtroom scene. The whole tenor of the production was relentlessly somber, which is a bit absurd given that the audience is supposed to accept the intervention of the "doctor of law" and her "clerk" at face-value. The music was maudlin; the cinematography was just fraught with meaning with every single freaking shot. And by the climax, Pacino's characterization was vacillating between a hectoring shtetl-yenta and an annoyed New York Italian. The production had members of the mob spitting on him in the courtroom scene to inject some badly needed emotional impact, which was sorely lacking in Pacino's performance. His reading of the lines beginning But, say, it is my humour: is it answer'd? was just terrible.
It would have been better to do a straight-up performance of the play, with all of the depth that Shylock is given by Shakespeare and no more — or else to do another play entirely.