The great thing about this film (and the sort of thing that upsets people who like seeing martial arts fights where you can see every kick and every punch) is that most of the fighting is just blurs of motion punctuated by shouting and clashing blades. This is what I love in HK fantasies: fight scenes that are so incomprehensible you're left going: huh?
Tsui Hark's best example is Zu: Warriors from the Magic Mountain, where the viewer has to actually fill in the blanks for themselves. It's edited in such a way that that the film we see feels like only a portion of the story. In some contexts this technique would be stupid, but in fantasy it's wonderful. It's the inverse of the computer graphics bare-all approach, and it's lucky that we had the HK film industry to provide an alternative to Hollywood in this regard. (I say had, because, since Storm Riders, cg in HK is more prevalent than before.)
This approach to fight scenes is impressionistic, and with the final fightscene in Dao it's almost operatic. At no stage do you get a feeling that the fight is actually rational. The use of sound and music in the film is also wonderful, especially in the menacing flashback scene. It's hard to think of a more effective way of setting up a backstory, and gives new life to that tired old cliche, the revenge story.
So that's all good. Sometimes, however, the impressionism gets a bit out of hand. Things take on a Wong Kar Wai pretentiousness, like the horrible Ashes of time, where Leslie Cheung sits around feeling sorry for himself for no appreciable reason. In Dao, the voiceover of the female character gets really annoying. Her mutterings only really serve to remind us she is there, as she has only one pivotal scene in the film (where tells the hero his origin story).
The film is also a bit over-bloody for my taste, but it certainly leaves one with no illusions about the brutalness of the world in which the film is set.
Dao is one of those films that is so strange and vivid it leaves a strong resonance with the viewer long after it is over. It has faults by the barrel, but I'd rather have it and Tsui Hark with us than a legion of James Camerons and Roland Emmerichs.