Jerry Garcia was a very accomplished banjo player, indeed! I recently met a fella who claimed that he took banjo lessons from JG. Probably true.
I recently bought a DVD of the Sarragossa Manuscript which mentions (in the "liner notes") that Garcia was very impressed with and influenced by the movie and attempted to get the director's cut into the Pacific Film Archives. He spent quite a bit of money doing so but the version which they received was the shorter version. The DVD currently available IS the full director's cut. Martin Scorsese is responsible for the full version now being available.
If you haven't seen the film, it is certainly worth seeking out. There is a relationship between the structure of the film and the structure of the music of the Grateful Dead.