Sir Launcelot is a pretty minor character in this book. We hear a little bit about his great deeds in the first few chapters, and they sort of set the ground rules for Twain's satire: some examples of overblown heroics that the book then ruthlessly puts down. Launcelot's heroics are never believable.
At the same time, Launcelot seems to be a little nobler than the other knights. He rescues Arthur and Hank on a bicycle, offers Hank a weapon during his duel with Sagramor, and even accepts his defeat at Hank's hands with grace and sportsmanship.
Unfortunately, he's also sleeping with Guenever—in keeping with the classic legends—and his dalliance leads to war with the king; this makes him kind of a holdover from the works Twain is satirizing. He keeps Launcelot around to make sure we know we're in Arthurian times—and to further send up the rest of the knights, who don't act quite as nicely as does.