Interesting series Jim, I hope it thrives. Maybe I'll be able to generate some interesting conversations/arguements to build up your comments and traffic.
That said, being late to the party I'm going to mention an issue that Jim might want to consider when talking about why certain films fail, or get more in the way of flak than they deserve, which I would have started back with "Aliens 3" had I been paying enough attention to the site to see the new series launch:
One has to remember that with really popular franchises that spawn a lot of official "branded" material there are expectations of quality and consistincy. With "Alien 3" for example this movie got slammed in part because it was released AFTER an extremely well received run of comics done by "Dark Horse" which were supposed to be an official continuation of the storyline, and picked up with a surviving Newt and Hicks in that universe. It set a pretty high bar for the continuation of the series. The problem with "Alien 3" to a large extent was that it not only took a huge dump on the continuity which series fans loved (pretty much if you saw that movie, you were probably reading the comics) but it also failed to improve on it in the eyes of the fans. It might have been forgiven for ignoring a comics continuation and the fact that it was SUPPOSED to have been official, IF it had produced something equally strong, and while "Aliens 3" might have been fine as a movie, it was a complete failure due to it's own competition in brand. It actually damaged the franchise by destroying the comics continuity which people could no longer get into as being "official" while leaving behind what fans felt was comparitively crap.
With "Blair Witch 2" (bet you were waiting for me to get on subject) it's a very similar situation. The original Blair Witch was popular enough to spawn series of young adult novels, merchandise, and even a series of video games, all of which were fairly clever and built up the mythology surrounding events. Basically if you were a serious "Blair Witch" fan, you were following this stuff, and it's success was apparently how they gauged that there was enough interest to do a sequel. The problem was that like "Alien 3" they pretty much ignored most of the stuff that had been established (though I believe there were a few referances) and arguably replaced a growing mythology with something that was inferior to most of the creations surrounding it. Whether the movie was on it's own merits that terrible, you have to remember that the core audience wasn't just looking at the movie on it's own merits. That's something critics need to learn to understand.
I also think that "Blair Witch" in paticular was built around a franchise killing premise. That is to say a lot of wierdness with no real answers ever being intended. Some people naively think this makes horror movies "better" but in reality is just pure laziness. In the end what sells a good mythology is when everything ties together and the end result is as cool as the mystery was. That's hard to do, but then again writing was never accused of being easy and
it's why good ones are so lionized. People ultimatly wanted to have the questions clearly answered, and despite the end of "Book Of Shadows" they really weren't. The tie in products were however beginning to answer those questions before they were squashed, and really if they had used the movie sequel as a sort of finale of the process it might have been a lot better received. That said, if you look at what happened with "Lost" when it began to get dragged out (and post finale falloff, despite the horrbily tacked on answers) and things like that, you can see why what they tried to do with "Blair Witch" just generally doesn't work, albiet it WAS one of the first mainstream movies of this generation
to try it.
Now, I notice that MDF's intro mentions a lot of franchise movies as paragons of what should be defended. In defending these movies however I think you need to consider the big picture, especially as it stood when these movies were released. Oftentimes that makes it easy to understand why the fans didn't rally for them like others. For example when looking at "Freddy Vs. Jason" the movie was entertaining, but then consider that that was a fight every 80s seriel horror fan had in their mind since they were little kids, dozens of scripts were presented over the years, many of which were linked, and tons of people had sketched out exactly that fight one way or another. The problem I think was that they made a mistake of trying to make a movie aimed at a very select crowd of long-term horror nerds too accessible, didn't give it the depth and minutae people wanted, and in the end released a product that while okay as a movie actually managed to be inferior as a Jason Vs. Freddy confrontation to a lot of fanfics or leaked scripts featuring the idea.
This might sound strange, but in closing I'll say that this kind of recurring mishandling of established mythologies might be a thing of the past as media winds up growing closer together, and you start seeing ARGs connected to video games and movies, and so on, to the point where in some cases you get cohesive mythologies built accross a number of platforms, none of which gives the entire picture, but is intended to be experienced together.
I think as a template for franchises, companies need to look back as far as HP Lovecraft, the guy who built what is pretty much the most enduring horror mythos ever, despite the involvement of a number of period authors and wierd tales creators with their own ideas. That is to say that they need to develop a solid vision of "the truth", keep to it, and then have someone to administrate consistincy with that even as things are being added to it. I mention this because it's possible to have some really good mysteries involving the Lovecraftian mythos and then tie everything together in the end and have it all make sense while still being pretty bloody terrifying... which is largely why the mythos continues to survive and be used today. In the hands of a decent author (you don't need to be an incredible one, which is part of the point) you can consistantly produce some nasty stuff keeping to those tenets.
To be honest when I was younger I thought for a little while that "Blair Witch" might have grown into something similar if not as pervasive, and on a more limited scale. "Book Of Shadows" kind of ruined that to be honest, and truthfully after tha movie it didn't seem like there was much interest in developing the universe. The same can be said of "Alien 3" for that matter, when the people building it were crushed under the weight of a inferior movie that wrecked their work, they kind of gave up on it.