ARTHUR: It is I, Arthur, son of Uther Pendragon, from the castle of Camelot. King of the Britons, defeater of the Saxons, sovereign of all England!
GUARD: Pull the other one!
ARTHUR: I am. And this is my trusty servant Patsy. We have ridden the length and breadth of the land in search of knights who will join me in my court of Camelot. I must speak with your lord and master.
GUARD: What, ridden on a horse?
GUARD: You're using coconuts!
In case you didn't know, "pull the other one" is an idiom that essentially means "yeah right". The guard is basically calling Arthur out, saying there's no way he's a king. To be fair, he doesn't even have a horse; Patsy is using coconuts to mimic the horse's sound, another thing the guard calls them out on.
Also, notice the elevation difference. The guard appears to be way above him on a castle wall and every shot emphasizes this, we never just get the guards point of view. The guard is in the position of power here while the famous King Arthur is not. And it's only just the first scene.
ARTHUR: Please, please good people. I am in haste. Who lives in that castle?
DENNIS' MOTHER: No one lives there.
ARTHUR: Then who is your lord?
DENNIS' MOTHER: We don't have a lord.
DENNIS: I told you. We're an anarcho-syndicalist commune. We take it in turns to act as a sort of executive officer for the week...
DENNIS: …but all the decisions of that officer have to be ratified at a special biweekly meeting…
ARTHUR: Yes, I see.
DENNIS: …by a simple majority in the case of purely internal affairs…
ARTHUR: Be quiet!
DENNIS: …but by a two-thirds majority in the case of more major—
ARTHUR: Be quiet! I order you to be quiet!
DENNIS' MOTHER: Order, eh? Who does he think he is?
Arthur can't even command respect from some mud-mining peasants. Dennis is a forward thinking dude who seems to be an expert in self-government. On the other hand, Arthur is traveling the land in search of knights and Dennis is digging in the dirt.
So while Dennis isn't fazed by Arthur's title, the power discrepancy still exists. Dennis' ideal commune doesn't have a power hierarchy; everyone takes turns running the group. You can see how far that got them. Both kingly authority and egalitarian forms of government get the Python treatment here.
DENNIS: I mean, if I went around sayin' I was an emperor just because some moistened bint had lobbed a scimitar at me, they'd put me away!
ARTHUR: Shut up! Will you shut up! [Arthur grabs and shakes him]
DENNIS: Ah, now we see the violence inherent in the system.
ARTHUR: Shut up!
DENNIS: Oh! Come and see the violence inherent in the system! Help! Help! I'm being repressed!
ARTHUR: Bloody peasant!
DENNIS: Oh, what a giveaway. Did you here that? Did you here that, eh?
Dennis actually has a point here. If Arthur wanted to, he could draw Excalibur (or whatever sword he's carrying) and silence Dennis for good. Violence is power, and it won't be the last time we see it in Holy Grail.
RUDE FRENCHMAN: You don't frighten us with your silly knees-bent running around advancing behavior!
Nothing like ridicule to puncture one's confidence and reverse the power dynamic. Political cartoonists know this well.
ARTHUR: Knights of Ni, we are but simple travelers who seek the enchanter who lives beyond these woods.
KNIGHT WHO SAYS NI: Ni! Ni! Ni! Ni!
ARTHUR AND PARTY: Oh, ow!
KNIGHT WHO SAYS NI We shall say "ni" again to you if you do not appease us.
ARTHUR: Well, what is it you want?
KNIGHT WHO SAYS NI: We want... a shrubbery!
ARTHUR: A what?
KNIGHT WHO SAYS NI: Ni! Ni!
ARTHUR AND PARTY: Oh, ow!
ARTHUR: Please, please! No more! We shall find a shrubbery.
We're not sure what's up with the word "ni", but we can't help but agree that it's rather terrifying. Maybe it's the malice with which it's said, or maybe the fact that few hear it and live to tell the tale. Even Arthur resorts to using it to torture a poor old lady. Language once again, is a means to control other people, even kings.