Don Quixote is often quite funny, even hilarious in parts, but beneath the humor, the elements of tragedy certainly exist. You might consider these subtopics in writing a paper over the novel as tragedy:
I. the suffering and destruction of the hero, Don Quixote
II. the destruction of Don Quixote's romantic dream
III. the loss of what might have been
During his quests, Don Quixote suffers hunger, deprivation, physical injuries, and great physical pain. Finally, he comes home to die, sane at last, but clearly depressed. The life has gone out of him, and he dies. He is no longer the brave knight-errant; he is an old man who has reached the end of his days.
His great romantic dream dies, as well. Quixote yearns for a world of justice and compassion. He will rescue the defenseless, defeat evil, and right that which is wrong. He dreams of a world where honor is more important than death. His dream dies; illusion cannot be maintained in the face of reality.
Finally, in thinking of the tragedy of Don Quixote, consider what his life might have been had he not become obsessed with his books of chivalry. He sacrificed his real life with his home, his niece, his friends, and his loyal housekeeper while pursuing a life and a time that no longer existed. He came to regret this later as he lay dying.
Perhaps these ideas will be helpful to you. There is much to think about in Cervantes' novel.