I can't say I agree with you here.
I saw this during the original release in the UK. It was absolutely spectacular on the big screen (it really pales on television). Leaving aside that I don't think Ewan McGregor and Nicole Kidman have ever been better, singing their hearts out and looking like they're having a blast, I do accept - to a degree - that Luhrmann is an acquired taste. But I think he's a genius and I love all his films.
Nothing in Moulin Rouge! should work yet - for me at least - somehow it does. Whether its the reach-for-the dramamine psychedelic first twenty minutes or so (complete with Kylie Minogue cameo), snatches of David Bowie, Elton John, bizarre Bollywood remixes of Diamonds are a Girl Best Friend, clever (and often hilarious) restagings of songs such as Like a Virgin, or snippets of Nirvana, Queen, and DeBarge in gloriously anachronistic aplomb, it all becomes a delight with the sizzling chemistry between Kidman and McGregor. Plus I think the ending has real romantic tragedy pathos and is properly heart-wrenching to great effect.
On a more personal note, I should add this was released in the UK the weekend after the 9/11 tragedy. With such horrors looming large in our minds, seeing this film was just the romantic escapism tonic my wife and I so desperately needed. We loved it so much we saw it the next day as well. It's still one of our favourites. :)