WMG / Felix the Cat: The Movie

The movie is actually set in a Bad Future dimension of Felix's world instead of just another dimension.
Despite what Princess Oriana says, its possible the Dimensporter isn't just a bridge between other dimensions, but is also a Time Machine that reaches a long ways back into a time long forgotten in that future of Felix's world. This would also explain how the Duke of Zill somehow knew about the Master Cylinder—given his regal status, he probably had access to normally obscure or lost information on the past, including that of the original Master Cylinder, who he used as the template for his Cylinder army and, eventually, his own souped up Master Cylinder.

The Duke of Zil is an Alternate Universe Mirror counterpart to Master Cylinder (his pre-robotic form).
Both The Duke of Zil and the main universe Master Cylinder share similar backstories. In Master Cylinder's case, he was a pupil studying science under The Professor, and his original body was unwittingly destroyed in a chemistry lab explosion, forcing his brain to be put inside of the robotic body that he is recognized as. The Duke of Zil built his own robotic cylinder, but whereas the Cylinder body saved Master Cylinder's life in the main universe, the Cylinder Zil built did the exact opposite—the prototype blew up in his face and left him with severe internal injuries, forcing him to don a robotic life support suit. Basically, he's a more realistic take on what Master Cylinder would be like—instead of a cartoony Brain in a Jar robot, he's a crippled cyborg who uses his Cylinders (including his own massive Master Cylinder) as a proxy, an extension of his will and power.

The film is actually propaganda produced by Princess Oriana.
The Duke of Zill was actually a highly competent Rebel Leader who rightfully disposed of the Princess because she was clearly running her kingdom into the ground with her poor decision making. He originally built the cylinders like he said in the film, "to revolutionize labor." He wasn't exiled to the Land of Zill, he left willingly, traveling to a place where his efforts to improve a society would be appreciated, and there he built an industrial society in the form of Progress City. He then returned to uplift Oriana as well, but for that he needed the Book of Ultimate power. After his defeat, history was written by the victors.

The dimension of Oriana is actually the Earth of Wizards.
Both are radioactive wastelands of high-magic that are at war with evil technology filled with fascist villains leading armies of mutant creatures.

This movie started out as an original movie with no ties to Felix the Cat.
It was going to be an original movie about a hero going through some bizarre land and saving a princess and her kingdom from her evil uncle, but it had some difficulties getting off the ground. As the cast and crew tried to work on their original movie, someone informed them that they were now going to help make a movie about Felix the Cat. Shortly after that, they had the idea that they could use their original movie for the basis of the Felix the Cat movie by making the protagonist Felix, and that's how the movie turned out the way it was.

If that's not the case, then I have no idea how the cast and crew of this movie came up with most of the plot for this movie with Felix in mind.

The Duke of Zill was actully trying to act as a Stealth Mentor to Princess Oriana.
Think about it. Oriana's Kingdom had no army and the treasury was completely empty due to the princess' bad decisions. So lets say that the Duke of Zill hears about this and is afraid for his homeland. However due to the circumstances of his departure he can't just go offer his niece some lessons on proper fiscal policy. So he comes up with this plan to attack the kingdom and act as a Stealth Mentor.

In support of this theory, it should be pointed out that neither the creation of his robot or the welding of the swamp tribes into a nation could be considered an evil act. He created the robot to act as a laborforce for the people of the kingdom. As the swamp dwellers , we are told that they used to be just a few wandering tribes who had to fight every day just to survive. Under the Duke's leadership they are not only a fully industrialized nation, but the ordinary person is able to take the evening off to go watch a show.That doesn't sound particularly villainous, does it. Once the Duke captures the princess does he killed her or chain her up in a deep dark dungeon? No. He puts her in a room with a comfortable bed and a photo album full of picture of her father. He then makes sure that she can get out to see how his people are doing.

Felix was not the hero that was originally supposed to save Oriana.
The hero was described as a "dark stranger". It was obviously supposed to be Batman.

This movie has ties to the live action film version of The Cat in the Hat.
The Cat in the Hat's box is filled with weird crap that can warp reality, Oriana itself has weird crap in it. Makes about as much sense as either movie.
http://tvtropes.org/pmwiki/pmwiki.php/WMG/FelixTheCatTheMovie