When I was living in Newark, Ohio between 2002 and 2006, I frequently saw this at one of the local libraries (If it's relevant, I believe it was at the 101 W Main St location) as one of the movies to rent, but I never got around to it (I don't remember if it was VHS or DVD). I remember the back of the case advertising that it involved (or maybe was based around the music of) a rock band. All I specifically remember was that it involved some sort of mystic threat (zombies, maybe?) and that the various film stills in the back involved one shot with a specific filter, maybe a digital negative, that made it look very psychodelic.
After a bit more Googling, I found the right keywords, and I think this is the 1971 film, Zachariah.
The film is loosely based on the works of Hermann Hesse's 1922 novel Siddhartha, and 1930 novel Narcissus and Goldmund (wherein two young friends take divergent paths in life, to reunite and share similar perspectives); surrealistically adapted as a musical Western. Massot said his inspiration came from when he joined the Beatles in India, when they were studying Transcendental Meditation under Maharishi Mahesh Yogi in early 1968. Massot said he arrived to find only George Harrison and John Lennon there, after their bandmates had left the course early, and the two Beatles "locked into some sort of meditation duel … to see who was the stronger character".
Massot initially asked Harrison to provide the film's soundtrack, following his work on Wonderwall, which Massot directed. According to Levon Helm of The Band, Harrison discussed making Zachariah as an Apple Films project starring Bob Dylan and The Band, in late 1968. The following April, Rolling Stone announced that Cream's drummer Ginger Baker and The Band were to be major players in the film.
This film was billed as "The first electric Western". It features appearances and music supplied by rock bands from the 1970s, including the James Gang, New York Rock & Roll Ensemble, White Lightning and Country Joe and the Fish as "The Cracker Gang". Fiddler Doug Kershaw has a musical cameo as does Elvin Jones as a gunslinging drummer named Job Cain.
It matches my memories of this being a somewhat psychedelic western with a then-prominent band. It has Country Joe and the Fish playing with anachronistic instruments as "The Crackers".
Found with search terms of
western film band