It's funny you should mention that Welles was interested in I AM LEGEND, because I asked Richard Matheson about that story, as well. Apparently, that's another bogus account, because in Charlton Heston's diary, he mentions wanting to work with Welles on another last man on earth story, EARTH ABIDES, after they finished TOUCH OF EVIL, which is probably how the story got started that Welles wanted to do I AM LEGEND. Here's what Matheson had to say:
TODD BAESEN: There's a story I heard about I AM LEGEND, although I don't know whether it's true or not. Apparently Orson Welles liked I AM LEGEND and suggested to Charlton Heston that he read it while they were both working on TOUCH OF EVIL in 1957. So Heston read I AM LEGEND, liked it and wanted to make it with Welles. Of course, Heston ended up making it as THE OMEGA MAN, without Welles directing.
RICHARD MATHESON: (laughing) I wonder if Heston realized he was doing my book when he made THE OMEGA MAN? If he liked the book, he certainly didn't allow much of it to remain.
TODD BAESEN: So did Welles ever show any interest about making I AM LEGEND?
RICHARD MATHESON: No, not to me. I met Welles while they were making TOUCH OF EVIL. He was there at Universal, looking at the rough-cut of THE SHRINKING MAN, and both TOUCH OF EVIL and THE SHRINKING MAN were produced by Albert Zugsmith. Welles even did the voice overs for the trailers on THE SHRINKING MAN. I hear stories like that all the time, though. Jim Nicholson told me that when AIP was making DeSADE, John Huston, who was acting in the film said, "Why didn't you ask me to direct it? I would have been happy to do it." Well, that made my day, after it was done so weirdly. At first, I was thrilled when I heard Cy Enfield was going to direct DeSADE, because I think ZULU is one of the greatest action pictures ever made. But from what Roger Corman told me, AIP didn't really know what was happening over there in Germany. So Roger had to go over there and fill in the gaps and throw in a few orgy scenes. I remember meeting with the editor, who worked on THE BLUE MAX, and he said he only had three-quarters of a film there!