If you haven't read the book, then this could be a bit informational of the plot, but not too much.
I think Christopher Guest should produce The Blue Sword. It could be incredible. I'm not talking about a comedic interpretation, either. A serious, beautifully rendered story arc where Guest brings his troupe to play key characters, and we see a visually stunning story of a girl feeling lost finding her home was not where she thought it should be.
Personally, I'm all for the main characters, Harry and Corlath, being complete unknowns, but if I have to make a decision, I think Chloe Grace Moretz would be a great Harry Crewe. Corlath is a little harder. Damar itself is an ethnically ambiguous country. The book gives the feel of the British occupation of India, but many of the traditions and languages of the country seem Middle Eastern in origin. However, when you reach Damar, it has the feeling of fairy country, like the land past Avalon, or sailing West for an Elf.
Guestian's will be best placed in the atmosphere, where they will form a cohesive universe that will support the development of the story. They are actors that can produce the best, most believable results, and it will be refreshing to see Jennifer Coolidge playing the prim and proper Lady Amelia with English-like decorations. Catherine O'Hara, of course, needs to play Aerin. She shows up in visions and flames and flashes. She is Harry's guide to the power of her Kelar.
Eugene Levy will have to be Thurra. His presence used to produce a commanding, half-demon villain that shows up at the end to battle Harry. Fred Willard could be Sir Charles, a stolid politician, and Bob Balaban could take on Mr. Peterson, the right-hand translator and father of Cassie and Beth Peterson, who could be delightfully played by the Fanning sisters.
There is Richard, Harry's brother, another role Guest would be tasked to cast. Christopher Guest himself would have to play Mathin, Harry's teacher and friend and fellow rider. Parker Posey could play either Kentarre or Senay, though I'd lean towards the former. Jim Piddock and Michael McKean could either appear towards the end as one of the fellow defectors of the General Mundy or could be one of the King's Riders. Ed Begley, Jr. would be a perfect Luthe. Jane Lynch would find her place in the land of Damar. Michael Hitchcock could fill the ranks of the King's Riders, as well. John Michael Higgins and Larry Miller could also pop up anywhere. Harry Shearer would personify Colonel Jack Dedham.
There is room for fluctuation, but the best part is that this is a collection of actors that work well together and can make this epic alive with the wonder and magic it deserves. The feel of the story is important, and feel is something that Guest has done well. I would love to see these actors playing colorful characters who are also telling a classic story. It may not be a common fairy tale, but it is my favorite fairy tale, and Christopher Guest would breathe life into its pages.