The interesting thing about the hybridisation of documentaries is that nothing is always what it seems. And just as City World (see last post) suggested something more expansive than a child's-eye view of life, so I Have Always Been A Dreamer, by Sabine Gruffat, led me to expect something smaller than a compare-and-contrast view of two huge cities: Detroit, USA, and Dubai, UAE. Though certainly informative, the film can't help but suffer comparisons with two recent docs on the Motor City – mostly Detropia, by Heidi Ewing and Rachel Grady, and also Julien Temple's BBC film Requiem For Detroit? – while the Dubai section doesn't have as much history to work with. I found my mind wandering a bit, which was also, unfortunately, the case with The Last Station, by Cristian Soto and Catalina Vergara. A very beautifully lit and respectful study of a remote old people's home in Chile, this mosaic piece felt like an Old Master come to life, but, in the context of a busy festival, its near-glacial pace worked against it; I should probably see it again.

From here we go to four films that wilfully mix fact and fiction, starting with Caesar Must Die by the Taviani brothers, a film I first saw in San Sebastian and remains one of my favourite festival experiences of the year. It was interesting to see this film cued up as a doc, because, although it sort of is, I had previously seen it as fiction, which it also sort of is, showing a cast of violent Italian prison inmates acting out their own interpretation of Shakespeare's Julius Caesar. The blurring of real life and fantasy is brilliantly balanced here – right up until the end when the slam of a cell door brings the high of this imperfect but emotionally electric performance to a sad, grey end.

A film that seemed to be much more simple and yet proved to be anything but was Searching For Bill by Jonas Poher Rasmussen – the only film I'll be mentioning that wasn't in competition at CPH:DOX. It had a lot going for it, but by the end I felt a little cheated. This is a film that sets itself up in chapters, has myriad characters that all, tacitly, seem to be headed in the same direction (ie, toward the title character Bill, a con artist whose diary is found), but by the end shatters like a shot glass in any number of (unsatisfying) directions. I assumed it was a comment on post-recession America, and there's a lot about it to commend it, but its shaggy-dog storyline is just that, I suspect.

I preferred, but not by a great deal, Roland Hassel by Måns Månsson, the study of a retired detective investigating the assassination of Norwegian prime minister Olof Palme in 1986. Palme's story is fascinating in its own right, leading to some incredible, and certainly plausible conspiracy theories, but this film doesn't really go there, instead telling the true and truly Zodiac-like tale of a man dedicated to history. Local critics thought it could have been better, but I liked Hassel as a character, and though the film's international prospects aren't great, he seemed a good ambassador for Palme's odd story.

And speaking of ambassadors, local hero Mads Brugger – who played The Ambassador in the hilarious yet horrifying Danish exposé of the same name, following the trail of corruption to blood Diamonds in Africa – was on hand on CPH:DOX's closing night to give the festival's main award to The Act Of Killing by Joshua Oppenheimer, the hands-down winner of the main competition. To say this film deserves to be seen is an understatement; there are really few words to describe the images it shows or, more disturbingly, the memories it conjures with. I must admit that I have some issues with the length and structure of the film, but these aren't by any means huge. And I also think that most audiences won't notice either throughout this somewhat jaw-dropping expedition.

As with Brugger's The Ambassador, this film is an intervention of sorts into foreign parts, this time Indonesia, where, in 1965, an attempted coup against the country's authoritarian president resulted in the deaths of half a million “communist” agitators. But as this often spine-chilling film shows, the rules of engagement weren't as simple as state versus enemy: the government drafted in some freelancers – aka gangsters – to help them clear up. In other hands, this film could have been a John Pilger-esque piece about the killing fields of the east, but Oppenheimer has gone for something different. He sees the grotesqueness of this situation and wishes to prod it; as a result, he finds certain gentlemen who were involved in this genocide and invites them to make a movie of it.

But the most shocking part of the story is how amiable those men turn out to be, principally the lovable Anwar Congo, who recalls and shows for us how he invented a new, cleaner way to kill Communists after deciding that beating them to death was messy and inhumane. Congo is a genuinely ambiguous “hero” (in the narrative term); much less the others. One lobbies for election while boasting about how he'll cream money from his constituents on breaches of planning permissions, another constantly snipes at the others – on camera – about how the film will sully their “noble” cause. And he's right: everybody on camera in this film reveals a shocking side of their society, from the journalist who claims he saw nothing, to the politician that let it all happen, not to mention the village voters who scorn any candidate that hasn't brought them “gifts”.

The groundswell on this film is quite small at the moment, but its legend is sure to grow, since The Act Of Killing doesn't just tell a story, it dramatises it too – in ways you wouldn't believe, with sequences involving dancing girls, lilting Tiki-style muzak, cheesy amateur gore effects and lumpen re-enactments that look like mid-80s Australian soap opera visions of GoodFellas, but much, much cheaper. The whole is a nightmare where, for the viewer, civilisation seems to disintegrate – which, in a sense, is what so horrifically happened in 1965. “I have not seen a film as powerful, surreal, and frightening in at least a decade,” says executive producer Werner Herzog, who knows insanity when he sees it. He's right. Oppenheimer's film recalls Apocalypse Now. Except this time for real.