Yes, John is psychic and is literally told so by one of the sisters (in the story, quite directly). He chooses to deny this or his rational mind (he's British in the story, natch) simply cannot accept it. In the story, John thinks the "figure in red" is a terrified little girl running from some abuser and he goes into the house to save her, never for a moment thinking she's the killer (or his daughter for that matter). It is Roeg's film that develops the ideas of the daughter/dwarf/figure in red being intertwined in the past and present (and future).
In both versions, John goes into a sort of shock when he realizes the figure in red is not a little girl but a dwarf. In the story, she throws the knife at him and it lodges in his neck. This is one of the few movie deaths that seem horribly real to me...not like an actor pretending to die...but someone actually dying. I'd say that's pretty powerful filmmaking.
But back to the issue of "boring". This film is deliberately slow paced. It is a movie more concerned with creating a mood and a creepy atmosphere than providing the viewer with non-stop thrills. You have to pay attention to it, focus on it...it requires you to think. What could be more creepy than a murderer on the loose in off-season Venice? A city that's pretty damn creepy in the on-season? The only off notes are the 70's fashions and hair styles. A particularly awful time for style across the boards and it has cripplingly dated many films from the period. Even The Exorcist is a little less scary now because you're snickering at the awful clothes.
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