There is a noticeable trend in Chinese martial arts movies: The further back in time a movie is set, the more magical the martial arts will be. Movies set in the modern day or near past, like Fearless, generally obey the laws of physics. If the plot is set in the far distant past and involves something like the Monkey King or Buddhist relics, then you should expect anyone and everyone to throw around mystical chi powers at will while treating gravity and other physical laws as a mere suggestion, like speed limits.
House of Flying Daggers is set about a thousand years ago in historical China, so it falls halfway between these two extremes. The melee combat is generally realistic, but everyone is acrobatic enough to climb up bamboo stalks like a monkey, and anyone with martial arts skills can use bows, throwing knives, and other projectile weapons with impossible accuracy. There are plenty of 'yeah right' moments, but the setting, visuals, and choreography are so beautiful that you accept it as magic and go with it, like Legolas's arrow-shooting in Lord of the Rings.
In many ways, the movie reminds me of the epic Technicolor fantasias of 60's Hollywood, like Cleopatra. Everything is beautiful and colorful, the characters are larger than life, the plot is driven by their passions, and historical accuracy is simply not a priority. The ending is not a happy one, and feels like it came from some Shakespearean tragedy.
Chinese movies often remind me of old Hollywood history. While Japanese films are on the cutting edge both artistically and culturally, it always feels like the Chinese are stuck in some period of our past.
One nice thing about the movie is that there is no obvious propaganda. While the narration at the beginning says that the government is corrupt and the rebels are noble, the policeman turns out to be the good guy while the rebels are all either corrupt or heartlessly vicious. There is no nationalistic message, aside from a message that war and chaos ruin people's lives and prevent them from being happy.