If things had worked out even half as well as he had believed they would, you wouldn't need to be introduced to Troy Duffy. He would be an inescapable phenomenon: not just the toast of Hollywood but a multiplatinum rock star to boot. Back in 1997, when all this seemed briefly possible, the would-be director was prone to saying things like "I hope to conquer the world" and "The line of ass-kissers is getting longer every day."

Eight years later, the line of ass-kissers has dwindled to zero, the world remains unconquered and Duffy's biggest impact on Hollywood is as the subject of a documentary called Overnight, a sobering account of what happens when ego outstrips talent, and proof that there are few spectacles more grimly compelling than that of a man repeatedly kicking a gift horse in the mouth. Says co-director Tony Montana: "It was supposed to be a process film and it ended up being a cautionary tale."

At the beginning of 1997, Troy Duffy was a 28-year-old blue-collar Bostonian, bartending at a west Hollywood hangout called J Sloan's, when he sold a script for The Boondock Saints, a thriller about two Irish vigilantes, to Harvey Weinstein's independent powerhouse Miramax for $450,000. The story of how Weinstein graced J Sloan's with his presence for 10 minutes to sign the deal, and promised to buy the bar for Duffy, was pounced on by the press as both a rags-to-riches fairy tale and a symptom of the independent scene's overheated acquisitions market. Duffy also signed a $500,000 two-script deal with Paramount and his rock band, the Brood, were offered a major record contract.

Flushed with success, or at least the promise of it, Duffy thought it would be a neat idea to have his rise to the top documented by two J Sloan regulars, Tony Montana and Mark Brian Smith, who also co-managed the Brood. Unfortunately for everybody concerned, he chose this moment to metamorphose from a charismatic, hard-drinking maverick into an abusive, alcoholic megalomaniac.

"Right after he got his deal we interviewed him in the café and he's talking about how great he's going to become," says Smith. "When that interview was over we looked at each other and went, 'Uh-oh.'"

Over the course of Overnight, Duffy is the kind of man who only removes his foot from his mouth in order to shoot it. We see him declare that his band has "a deep cesspool of creativity". We see his novel approach to casting discussions: "I hate Keanu Reeves. I think he's a punk. Ethan Hawke is a fool. I love Branagh. I don't know how long I'm prepared to wait for Branagh." What we don't see is his refusal to meet Brad Pitt because the actor had already played an Irishman in The Devil's Own, nor his disastrous meeting with Ewan MacGregor. "He thought he could go up there and have a Scottish-Irish love affair," Montana says acidly. "Ewan was not interested in getting drunk with Troy and then they got into an argument over the death penalty."

Does he wonder what would have happened if Duffy had been more tactful? "If Troy had behaved differently he wouldn't have been Troy Duffy. It's like, what if Mike Tyson had never bitten off Evander's ear?"

MacGregor's refusal was the final straw for Weinstein. Already concerned about his well-publicised new protege's abrasive business style and heavy drinking, he put The Boondock Saints into turnaround. The rest of Overnight tracks Duffy's efforts to make the film with half the budget and a low-voltage cast, including Billy Connolly as the world's least convincing hitman.

Jinxed by Miramax's well-publicised rejection, it failed to sell at Cannes and eventually slunk into five cinemas in LA and Boston for one week. The Brood's soundtrack, meanwhile, sold just 690 copies in six months. They were swiftly dropped. The film ends with the man who once described himself as "Hollywood's new hard-on" overweight, out of work and convinced that Miramax is trying to assassinate him.

He still believes the quality of The Boondock Saints vindicates him, but after watching it, Weinstein's wisdom is hard to dispute. Notwithstanding a few clever lines and visual flourishes, it's a crass, trashy manifesto for vigilantism. In one scene, one of the brothers drops a toilet on a Russian gangster's head. By the end of the film, the viewer knows how the Russian feels.

"Troy wrote an A-script and he ended up delivering a B-movie," says Montana. "He bragged about trying to raise debate whereas the film he made is just a superhero movie," adds Smith.

Duffy's only public reaction to Overnight has been a brief statement in Variety, branding it "an 82-minute smear campaign". It's an accusation that riles Montana. "This is what happened. The materal we decided not to include was far more negative. Had it been a revenge piece we would have included all of Troy's many anti-semitic remarks and many remarks about gay people and minorities and famous actors. We did not do that. Everything we include is to tell the story."

On its most basic and enjoyable level, Overnight is a masterpiece of schadenfreude, but it's also a subtle indictment of the hysteria that gripped independent cinema in the post-Tarantino 1990s, as documented in Peter Biskind's book, Down and Dirty Pictures. According to Montana, Weinstein only bought The Boondock Saints because rival studio New Line wanted it first and he couldn't bear to lose a potential hot property. The day the Miramax boss stopped by J Sloan's, Montana continues, he hadn't even read the script.

"One critic said our movie was one of the best representations of the go-go 90s," says Smith. "I never thought of it that way but it really was. It was crazy. Producing and releasing was secondary to acquiring, and that's why films got shelved and certain film-makers got forgotten about. Harvey was one of the kings of that movement."

Matthew Hiltzik, who was head of corporate communications at Miramax at the time The Boondock Saints was filming, agrees that Weinstein's unorthodox methods lend spice to the story, but doesn't accept the fevered atmosphere of the time contributed to Duffy's downfall. "His lack of success was his own fault and no one else's," he says. "Hollywood is a closed place, where everyone is desperate to get their chance; the main lesson of this is a reminder that Harvey is willing to give anyone an opportunity. Unfortunately, it didn't have a happy ending." Hiltzik says the company looks at Overnight as "one man's story in which Miramax is a peripheral character".

Montana and Smith had their own crash course in the realities of film-making. When Duffy refused to give the pair their share of proceeds from the record deal, they were forced to live hand-to-mouth. Montana, who spends much of the film resembling a shellshock victim, lost his apartment and slept on couches. Smith had his car vandalised by loan sharks. Considering Duffy's increasingly toxic personality, why on earth did they keep going?

"We actually did hope [The Boondock Saints] would succeed somehow," says Montana. "We tried to help him out. The problem was that when his two endeavours failed, then he wanted us to fail as well. He called us up and threatened us. That's when I said to Mark, 'Look, we're going to cut this film and get it released.' I had no idea it would take this long. Would I do it all over again? No. I don't think anybody would. It's not a good business plan." Smith is more succinct. "It was a horrible situation we couldn't get out of because we were a prisoner of our own movie."

At least the two directors got their film finished and released. Duffy, meanwhile, has still not directed his second feature. Although The Boondock Saints did become a lucrative DVD hit with a young male fanbase he calls his "Boondock flock", Duffy had signed away all video and DVD proceeds in his initial contract. He now survives selling merchandise from his website and talking up a sequel, which at present constitutes little more than a few fansite rumours and a hopeful listing on the Internet Movie Database.

Since the first screening of Overnight at the 2004 Sundance film festival, Duffy has declined all contact with the press. Montana isn't surprised by Duffy's silence. "If you've dug your own grave and buried yourself alive, when you shout people can't hear you. What would he have to say? We could do a trilogy if we wanted and retell the entire story, and it would be the same Troy Duffy."

Montana and Smith are currently working on separate projects and giving occasional lectures at film schools, where Smith admits that they are usually the bearers of bad tidings. "I don't know if they like Tony and I coming in and bursting their bubble by saying, 'Guys, listen, it's not all peaches and cream out there.' It's not just about passion and making the movie you want to make, because you're going to have to make a lot of compromises and deal with a lot of shady people and get a lot of rejection. Most people don't make it."

· Overnight is released on July 8