I think someone manufactured a story based on really horrible animal abuses found in the source Munchausen stories themselves and not Gilliam's movie, or even older versions that might have been able to get away with animal abuse.
From Off Screen:
Some preliminary observations come to mind when viewing a great deal
of this work. All the films deal with essentially the same select
source material that amounts to about half of the original book’s
adventures.3 The other half of the book essentially consists of
viciously described hunting expeditions by the Baron. He recounts that
he “rammed the head [of a decapitated lion] further into the throat of
the crocodile, and destroyed him by suffocation.”4 Later, dressed in
the skin of a polar bear, Baron Munchausen kills thousands of other
polar bears by stabbing each in the back of the neck with a knife.
These occasions are by no means the grisliest of his tales.5 None of
the Munchausen films available to me has contained even one of these
expeditions; there is a silent and tacit refinement taking place by
each filmmaker. This may be explained by the changing tastes of
children (children who are, I must occasionally remind myself, the
primary audience of the Munchausen books and films); inexplicable,
however, is the lack of animal death in the earliest films, when it
might still have been acceptable. Consider, for example, another
children’s work from as late as the thirties: Hergé’s Tintin in the
Congo run in Le Petit Vingtième. Tintin explodes a rhinoceros and
stones a buffalo with abandon, and it was years before this was
modified to the current animal-friendly version. The filmmakers’
restraint is perplexing. And encouraging—the filmmakers respond to
Munchausen the fabulist, not the brute.