I think it would have worked better as a regular Altman comedy instead of an Altman musical comedy. Though one of my favorite Fleischer cartoons is "Beware of Barnacle Bill", which would have been even funnier if they'd used the dirty lyrics.
Flop in the theatres sure, but then home video rolled along and parents struggled to find something their kids would watch that wasn't a giant robot fighting a tentacle monster. I enjoyed Voltron in the 80s, but I suspect if I go back, half the villain monsters are going to seem like close ups of genitalia.
I quickly scanned Wikipedia. Apparently the film made back over double it's budget, but did not meet expectations. They were expecting blockbuster level numbers. It was a large co-production between Disney and Paramount. The reason the spinach isn't a huge part of the film is that it wasn't really a big part of the strip. Popeye was tough all the time, even without the spinach. The spinach was a gag, but wasn't really an integral part of the character until the cartoons. It was a prefect way to climax a short 6-8 minute short...they largely used the same format for the later Superman cartoons. One thing the movie did do different from Segar's strip was soften Popeye just a bit. In a lot of the strip, Popeye is a pretty violent (hilariously so) character who uses his fists before asking questions. The film is more in line with the cartoons and later comics where most of the people socked deserved it.
I love this film for its unforgiving quirky nature which I think the songs play perfectly into. Robin Williams, Ray Walston, Paul Dooley, and Paul L. Smith were all wonderfully cast, but it's Shelly Duvall who steals the film in the role she was born to play. I understand and accept that people don't like or this film, but I think it's fantastic.
I saw it as a kid and was a little underwhelmed but I've seen it again over the years and liked it. As has been said, the casting is superb and Williams was perfect as Popeye, with Duvall not far behind. Again, as I get older, I appreciate the songs more than I did. The main problem seems to be that, just like Tim Burton's Batman is a Burton movie first and a Batman one second, this is an Altman movie first and a Popeye one second. The almost-documentary style of camerawork, the muttered dialogue - it's a little off-putting to the younger audience at whom it was aimed. Having said that, I've played bits and pieces from it on YouTube for my kids (6 and 3) and they've loved the clips (they've never seen the cartoon Popeye), so maybe it was just 8 year-old me. I keep meaning to buy it on DVD for them.