You are right in your opinion on this matter. My suggestion is not to even think about messing around with copyrighted material. You would be very surprised how word can get out to the most unlikely of places. There is no play version of "Holy Grail" in existence and I wouldn't try an adaptation without the express permission of the Monty Python troupe.

What you're describing is a "derivative work," or a new intellectual property based on a pre-existing property. A movie based on a play or a play based on a movie are both examples of "derivative works.". Copyright law is very clear about who may produce a derivative work: only someone who has explicit permission from the owner of the original piece may create a derivative work. Doing so without that permission is a clear violation of US copyright law.

OK, so now you know it's a clear violation, and you can tell your board that. The problem you're facing is not whether you can or can't put on the play -- you can't -- but whether you can break this law and get away with it. In THAT debate, consider the fact that you will publicize your play somehow in your community, where presumably none of the Python troop have summer homes. Do you have a web site where you publicize your shows? Will information be published in the local newspaper? Does the paper have an online component? Is it possible that an actor may now, or at some point in the future, place his or her resume on the web and include the fact that they appeared in the production at your theater? Will somebody send an e-mail to someone who doesn't live in your community raving about this wonderful production they saw at your theater? My point is that we don't produce plays in a vacuum, and people are going to know that you're doing this, not just in your community, but possibly world-wide. And if someone among the many thousands or millions of people working in the movie industry learns about it, your group could be in deep kimshee.

Don't do it.

For more information about derivative works, straight from the US Copyright Office, check out http://www.copyright.gov/circs/circ14.html

I know this story has a happy and legal ending but I have to share a quick story about how fast word travels. Our theater (in the Pacific Northwest) mentioned in passing that "The Vagina Monologues" would be a good play to produce. Nothing was done about it, it was a passing idea and the local University had already performed. A few months later, the author contacted our President and told him that she had heard about us producing it and that we were to cease immediately. We had never even seriously considered producing it, but word still got around.