Avatar The Last Airbender

Question 1) Unfortunately, it sounds as though M Night has it mostly written and is just waiting for the green light.

Question 2) The animated series is really good for kids and adults. My wife even liked it, and she normally hates anime.

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Will there be a second?

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If there is, it will likely be even worse since the second season has a far more complicated, longer, and more aimless plot to where very, very few episodes can be deleted for the film to make sense. Peter Jackson would have a tough time adapting the plot into a 3 hour long film, nevertheless Shyamalan who will do it in half that time. Plus I'm going to take a guess that they would change the Ba Sing Se plot to be almost unrecognizable since that part of the season is pretty anti-Beijing, so they will want that market and for it not to be banned in China. I mean they changed the Red Dawn remake in post production from Chinese to North Koreans, and that makes no sense.

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And, how were the animated movies? The M.Night version I just watched wasn't overly great, but it got me interested in the cartoon version. Are they worth a watch/purchase?

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Its not an animated movie, but a tv series. There are 60 episodes and are avaliable on NetFlix Instant. And yes its certainly worth the watch and almost nothing like Shyamalan's disaster. Especially worth it if you have kids to enjoy it with, but if not its still a fantastic series.

They have to make the other 2..

Part 1 - water
Part 2 - earth
Part 3 - fire

Some other director needs to get the rights from M Night Shitonmovies and remake the first one and then complete the trilogy.

I'd really only trust it in the hands of 3 directors right now: Guillermo del Toro, Peter Jackson, and Alfonso Cuaron. Also the film would have to be correctly casted (ie: no whitewashing) and shot simultaneously since the series takes place in less than a year's time.