During the 12th century the Knights Templar used the Maltese cross on their habit. It wasn't until a century or so later they were forced to change to the Roman cross. Unfortunately, this is a mistake that Hollywood has always made.
The so-called 'Templar' who attacks Balian before the battle of Hattin (in 1187) wears a white surcoat bearing a black cross: the arms of the Order of St Mary of the Germans (aka the Teutonic Knights). This order was not founded until 1190 at the very earliest.
In the Director's Cut, Sibylla tells her son, soon to be Baldwin V, in his geography lesson, that the King of England is Richard, the son of King Henry. Richard I did not succeed his father until 1189, three years after the death of Baldwin V.
Throughout the siege of Jerusalem, when the defenders use projectile weapons such as bows, trebuchets, crossbows, etc., the command given to release the projectile is "Fire!". This command did not come into use until the advent of matchlock firearms in the mid-15th century. The correct command would have been "Loose!".
While Balian is in Sicily, some crusaders can be seen carrying a banner with the arms of Castile and Leon quartered. However, in the 1180s Castile and Leon were separate kingdoms; it wasn't until 1230 when they were reunited and the quartered banner adopted.
Early in the film when performing his blacksmith duties, Balian is shown hot shoeing a horse with a forged iron shoe. However, iron horseshoes were not in widespread use in France until at least the 13th century, and hot shoeing didn't come into practice until the 17th century.
The trebuchets are shown with metal axles for the throwing arm (this is most visible as the camera moves past a trebuchet before Balian's knighting speech in Jerusalem). The technology of the time did not permit the creation of such large pieces of metal. Throughout medieval times a trebuchet axle would have been made from a thick timber.
Throughout the battle scenes, the crescent moon and star are used as symbols of Islam. However, these were only adopted by Muslims in the 14th century, beginning in North Africa. 12th century Arab armies would have carried black, green or white flags.
During the sea voyage and at other times, Balian is costumed in a top cinched with a row of buttons, almost a century before functional buttons appeared in his part of the world. Nonfunctional decorative buttons go back far in history, but functional buttons first appeared in the 1200's in Germany, spreading to other parts of Europe in the later 1200's through mid-1300's. Using tie strings or some manner cinching laces (or better, just a loose pullover top) would have been more period-appropriate.
When Balian is building the timber water channel he places the lower level duct on top of the higher one. This should be the opposite way round as in its current state any water running down would run under the lower duct and consequently be lost.
Saladin's recitation of Al-Fatiha (the first chapter of the Holy Quran) is not complete. After the surrender of Jerusalem, we see Saladin reciting the Sora, but he does not finish before he starts another one.
When the priest's assistants are burying Balian's wife, the priest instructs them to behead the corpse. One of them picks up the axe but in the close-up of the corpse's face, the axe is still lying on the ground next to her.
During the battle for Jerusalem, the crescent moon and the star in the banner change positions during a short period of time. First, the crescent is horizontal, with the star a short distance above it. In the next scene, the crescent is on an angle, and the star is where the unlit part of the moon would obscure it.
During the second day of the siege, Balian watches several Saracen soldiers put their flag upon one of the towers; Balian is seen taking a weapon from a nearby archer, if you look closely that weapon is a war hammer. In the next shot, Balian is seen slashing a Saracen with an arrow.
In the beginning of the movie when Balian is pounding on his piece, he is shown quenching the end of the piece after pounding on it, with the middle of the piece still hot enough to work. However, the next shot shows him once again working on the hot end, while the middle is cool.
In front of Reynald's castle, when Saladin's army comes, a yellow plastic pole that marks a stopping point for the foot soldiers is clearly visible. (This has been corrected for the Director's Cut DVD.)
In the movie Jerusalem is shown to be in a flat, sandy desert. Jerusalem is actually set on top of a mountain (Mount Zion) with massive valleys filled with trees, and other greenery surrounding the city walls.
The castle of Raynald of Chatillon, called simply "Karak" in the movie and known as "Crac des Moabites" at the time, is shown on a modest rise above a plain. It actually sits atop a ridge surrounded by fairly steep valleys.
Contrary to what is stated (that there were no knights in the city), Jerusalem did have a modest number of knights and men at arms, but not enough for a proper defense. Sixty new knights were created from squires and freemen (not the huge number shown in the film, and not from random servants). These provided the main defense of the city. Although their help was requested, almost no people from the population of the city joined in the defense.
The effects of trebuchets have been extremely overdone. They neither reach as far as the film implies (certainly not with that kind of angle) nor does the impact of the ammunition cause the ground to tremble as if it were modern artillery. A hurled stone on a massive city wall may cause a dent and merely a thump upon impact.
Contrary to what is shown, the casualties among the defenders in Jerusalem were actually only a few each day until the final fight. This was typical for close fought city or castle defenses, and reflected the extreme advantage of fighting from thick high walls with well placed towers.
During the ambush on the road in France, archers are shown using bows which are at least five and possibly six feet long. Such weapons would not be used in Europe for more than one hundred years, and even then they were only common on the British Isles. The bow in use at the time was shorter and had a relatively low pull weight, which was of very limited use against a well armored target. Further, in France, the bow was considered a weapon of war, and its use was prohibited by all but the ruling elite (and then only for hunting since the bow was not an honorable weapon), so archers (vice crossbowmen) were very rare.
In the movie we see Mullah (Khaled Nabawy) wearing clothes with inscriptions of the Quran on the arms. In Islam, it's completely forbidden to write any of the names of Allah, or any verses from the Quran on clothes. Although it is allowed to write "Allah is the great" or "there is no God except Allah and Muhammad is his messenger" on flags.
After the siege "all" were not "safely escorted to the sea". Rather, a ransom was paid, which allowed somewhat less than half of the actual refugees to go free. Those too poor to pay a ransom were taken into slavery.
The way for the final assault on the walls of Jerusalem was prepared by a variety of siege engines (although not trebuchets). However, the section of wall shown turned into rubble could not have been destroyed solely by siege projectiles, even over a number of days. The wall was actually brought down by a mine (a short tunnel under the wall).
Patriarch Eraclius is depicted as a coward who advocated abandoning Jerusalem and its inhabitants in order to save his and Balian's lives. In actuality, Balian wanted to leave the city, as he had come only to evacuate his wife and children and had sworn an oath to never take up arms against Saladin in order to cross the siege lines. Eraclius absolved him of his oath and encouraged him to fight Saladin long enough to negotiate a truce for the lives and freedom of Jerusalem's citizens. He then had all the churches' silver stripped down and melted into coins to pay the defenders. After the siege, Eraclius and Balian collected money from the city's wealthy to pay ransom for 18,000 inhabitants, and offered themselves (in vain) as hostages for the remaining 15,000 who couldn't pay.
At about the 1 hour 50 mark during the siege of Jerusalem the crescent moon can be seen above Jerusalem as the camera pans back from Balian. This is incorrect as the moon went from waxing gibbous to waning gibbous during the dates of the siege (20th September, 1187 - 2nd October, 1187).
In the directors cut version, Balian is in Jerusalem, praying where Christ was crucified - you see him burying his dead wife's silver necklace (cross). Later in the movie, you see him pulling out the ring that Sibylla gave him and kissing it - not the cross of his late wife.
The goof items below may give away important plot points.
Incorrectly regarded as goofs
Guy stabs Saladin's messenger in the throat with a small dagger. When the messenger falls, Guy is holding a bloody sword, rather than his dagger. This is corrected in the Director's cut, where Guy proceeds to behead the messenger with his sword.
Prop weapon visible, when the English Sergeant executes the son of Roger de Cormiere, his pick axe weapon clearly has a silver blade, when he removes it from Cormiere's skull, the blade is no longer on the weapon (nor is it in Cormiere's head).
About 132 minutes (2:12) of the Director's Cut of this film "King Guy de Lusignan" (Marton Csokas) leads the (doomed) Christian Army out into Saladin's "trap"; the open desert, with the Christian Army without water. During their march, in full chain mail and armored suits, the men are dying, victims of heat stroke, exhaustion, etc. If you look closely, the huge "Golden Cross" has already been pillaged (most of the gold stripped off by Saladin's men; however, they have not even encountered them (Saladin's army). Later in the film, when they do indeed run into Saladin and all his men, they do strip the cross of almost all the gold plating and trim. This is obviously a "revealing error".