The first fatal decision was to make a live-action film out of material that was born to be anime. The animation of the Nickelodeon TV series drew on the bright colors and "clear line" style of such masters as Miyazaki, and was a pleasure to observe. It's in the very nature of animation to make absurd visual sights more plausible.
Since "Airbender" involves the human manipulation of the forces of air, earth, water and fire, there is hardly an event that can be rendered plausibly in live action. That said, its special effects are atrocious. The first time the waterbender Katara summons a globe of water, which then splashes (offscreen) on her brother Sokka, he doesn't even get wet. Firebenders' flames don't seem to really burn, and so on.
I'm not sure if this is the sort of problem spin1978 had in mind when he made the offhand comment to me that "most [anime] would be better left as anime," but it's what I immediately thought of. So here is my response:
To me, that's kind of like saying since novels are almost always better than their respective film adaptations, they'd be "better left as books". I can't really fault people for wanting to try taking a good story and changing it from one medium to another. But changing media successfully is tough. Hollywood has had many years of practice at changing book-to-film, and so it has managed to eek out a fair number of successful adaptions (at the cost of a huge number of failures, of course). In recent years, it's also starting to get the hang of Western comics to film adaptations.
Manga/anime to film adaptations, though, it has very little practice with, so of course it's understandable to be skeptical that they can pull it off. I prefer to be a little more hopeful. I realize that one of the trickiest challenges they will face (if they're smart enough to realize it) is how to translate fantastical and even absurd images that are easier to believe in animated form into something realistic-looking enough for live-action. I can only begin to guess how that problem might be solved, but I think it's worth a try. They might consider borrowing the approach of some of the better Western comics to film adaptions like the Batman Begins/Dark Knight series, since those were dealing with essentially the same problem. How, for example, can you take a character like The Joker and put him in "real life" and make him seem realistic rather than cartoony? Well, you cast a good actor who can play a nuanced villain, and put him in makeup that looks like the amateur job a real psychotic criminal would put on himself, rather than what a professional Hollywood makeup artist would put on an actor.
I've heard that Tolkien didn't want his books to be made into live-action films, either, for essentially the same reason. Well, he died before the technology that made it possible even existed. But technology alone is not enough--a successful adaption has to balance respect for the source material with a willingness to make changes where needed to make the story appropriate to the new medium. That's something Peter Jackson and his team did very well. The films weren't perfect, of course, but they were very good--and hugely successful as a result. I'd say most of the Potter franchise came close enough to the right balance, too.
Anyway, I'm not going to rule out the possibility that Hollywood can make good film adaptations of popular anime. Between technology and a few smart decisions--like The Joker's makeup job--and, of course, sensible casting (which means, in the vast majority of cases, that they're going to have to start grooming good Asain-American actors instead of whitewashing stories that are clearly steeped in East Asian culture), I do think it's possible.
peachespig also brought up the problem of squeezing a large amount of story (20 epsidoes, in the case of TLA) into one feature-length film. This is, of course, also a problem with novel-to-film, and even MORE of a problem with Western comics-to-film. Again, I don't think this problem is insurmountable, and I think considering how much broader of an audience can be reached by live action films compared to anime (which has grown over the past 20 years from a niche market to a larger but still not-quite-mainstream market in the US), I really can't blame Hollywood for wanting to try.
ETA: io9 has posted a hilarious satirical review of TLA. It's the funniest thing I've seen all day:
Later in the film, Katara says my favorite line ever, "We need to show them that we believe in our beliefs as much as they believe in their beliefs." It's as if Shyamalan had a cue card that he was planning to turn into an actual bit of dialog, but he forgot. There's a lot of cue-card writing in this film, and it feels like Shyamalan is leaving things as sign-posty as possible, in order to make fun of the by-the-numbers storytelling in so many Hollywood epics. The master has come to school us all.