Reddit mentions of The Rare and Excellent History of Saladin or al-Nawadir al-Sultaniyya wa'l-Mahasin al-Yusufiyya by Baha' al-Din Ibn Shaddad (Crusade Texts in Translation)

Your first part is spot-on, your second part is a bit off. The depiction of Saladin in the film is extremely positive because Crusaders had a very positive impression of him for a variety of reasons, putting him into chivalric model they viewed themselves in because Saladin was, by all of the information available on him, an extremely shrewd political mind. Saladin worked to secure a number of treaties with Crusader states that made them quite pleased, which is part of the reason they looked at him so positively.

The chivalric depiction was picked up on by historians like H.A.R. Gibb who, like a great many in the west, really bought into this romantic view of him. While there are sources that aggrandize him into this figure, one must consider where they come from: Baha al-Din's "The Rare and Excellent History of Saladin" comes from an author within the retinue of Saladin who was patronized by him. What do you really expect him to say in such a source?

There are sources to the contrary, though, namely Ibn al-Athir al-Kamil fi’l-ta’rikh which present the opposite side, patronized by a Muslim enemy of Saladin that presents the opposite extreme.

As proves often to be the case, the truth is likely found somewhere in between.

For a primary source, there is:

• Bahāʼ al-Dīn Ibn Shaddād ; translated by D.S. Richards, The rare and excellent history of Saladin, or, al-Nawādir al-Sulṭāniyya wa'l-Maḥāsin al-Yūsufiyya, Routledge, 2002. https://www.amazon.com/al-Nawadir-al-Sultaniyya-wal-Mahasin-al-Yusufiyya-Translation/dp/0754633810/
  
  The writer worked for Saladin, and is very pro-Saladin.
  
  There are a few relatively recent biographies of Saladin. I liked:
  
  
• Anne-Marie Eddé, Saladin, Belknap Press, 2011.
  
  Eddé gives good coverage to Saladin's context - the politics and economics that partly drove a lot of his military decisions. The biographies by Geoffrey Hindley and John Man are shorter, and both are more aimed at the popular market (but IMO Eddé should be quite readable for the interested non-academic reader).

http://www.amazon.com/Excellent-History-Saladin-Crusade-Translation/dp/0754633810

Highly recommend reading, especially for men.