We went to see Avatar a few weeks ago in the movie theater. It was great, even though we didn't get prime seats. The theater was crowded, but nobody was too obnoxious. The movie was great. And it didn't feel like 3 hours.
Part of this has to do with the fact that, about halfway through the movie (somewhere in Act II, when everybody's been introduced, the premise has been laid out, but before the plot is about to be kicked into high gear), there's an intermission. You can go to the bathroom, get more popcorn, toss out your trash from the first half the movie, etc.
It's kind of weird the first few times--you're watching and all of a sudden there's an intermission screen. But it does add something to the experience--you can sit there and digest what you've seen so far. It lets you take a breather from all of the excitement--and trust me, with some movies, you need it.