As don Quixote is changing with the chapters the characters he interacts with seem to be changing as well. While don Quixote changes for (what so far seems to be) the better, the people he comes across seem to have worse attitudes and personalities than those in the first part of the novel.
Previously in the novel don Quixote didn’t seem to care for normal human values and manners (he wouldn’t pay for things, he wouldn’t accept consequences, he blamed everything on being enchanted, etc.), however, it seems that as the novel progresses so does don Quixote. After destroying the puppet show don Quixote pays for the damage he, this seems to be a change of character. I think don Quixote isn’t any less crazy than he was before, I think don Quixote is just starting to following along with social norms because he knows now what people think of him and how they will treat him if he doesn’t act a certain (desirable/sane) way.
Similarly, don Quixote tries to persuade some villagers not to attack another village, these seems out of character for don Quixote because usually he is willing to entire a fight. This time Sancho is the one who tries to encourage the attacking village by braying along with them, the villagers believe Sancho is mocking them and proceed to beat him up, this situation is what would have happened to don Quixote in the previous chapters. I think Cervantes may be trying to say that the more time Sancho spends with don Quixote he is becoming like him to the point where they have almost traded spots.
The people that don Quixote interacts are increasing the theme of theater in the novel, the Duke and Duchess put on a façade that makes don Quixote and Sancho believe that they are being truly genuine to them, however, the Duke and Duchess are just using don Quixote and Sancho as a source of entertainment, just as they would with a jester. They are wealthy and bored and after reading the first part of the novel, the pair decide that they will find joy in pranking and laughing at the unknowing pair.
Those around don Quixote no longer are people who are concerned with his well-being, they don’t want him to go home, they no longer look at him as a man with some intelligence, they no longer try to help smooth over problems he has caused. The people don Quixote has been meeting recently don’t pity him, they seem him as a fool for their amusement. The Duke and Duchess find humor in making servants wash don Quixote’s beard and not clean of the suds and they are tickled by the statements and actions of don Quixote and Sancho at their dinner.
Not only are the Duke and Duchess horrible people for making fun of the two, they create an entire theatrical trick that is to further humiliate don Quixote and Sancho, while providing them with a good laugh. “GREAT WAS the pleasure the duke and duchess got from their conversations with don Quixote and with Sancho Panza, and since they were eager to carry out pranks that would give the appearance and semblance of adventures, they chose as a theme what don Quixote had told them about the descent into the Cave of Montesinos, thinking it would make a good jest” (Chapter XXXIIII). Don Quixote and Sancho are forced to listen to “Merlin”, “the devil”, and others in wagons explain that Sancho must whip himself on his naked bottom in order to remove the enchantment on Dulcinea. Sancho says he will do it another time and eventually the Duke and Duchess leave with don Quixote and Sancho planning to continue their pranks.
I feel bad for don Quixote because previously he had people who wanted him to get better and even though I didn’t agree with the ways they tried to help him they still were trying and seemed to be pretty honest/ true to their characters. Now people of power abuse the unstable mind of a man making him easy to manipulate and laugh at without him knowing. In don Quixote’s case ignorance is definitely bliss.