The thing is, if it were *more* surreal I think it would have made more sense.

Ok, so we are in agreement on that =)

Didn't he even do research and then toss it out?

Yes, his father actually was in a German camp and he and others on the film crew worked closely with the Center for Contemporary Jewish in Milan as well as other survivor groups. While he was going for surrealism, there are many elements in the film that are historical.