The Czech academy also considered Jan Sverak's Empties and Alice Nellis' Little Girl Blue.
Since its premiere, I Served The King Of England has seen more than 800,000 admissions at home. In the first half of 2007, the film earned roughly $4m at local box offices, just short of its reported budget of $4.4m.
Menzel won the foreign-language Oscar in 1968 with Closely Watched Trains.
I Served The King Of England won the FIPRESCI award at Berlin this year and is nominated for this year's European Film Prize. Bavaria Film International is handling international sales.