The competitive advantage is in storytelling, not necessarily visual fidelity. People will watch a somewhat worse looking movie with a better story than a better looking movie with a worse story. And honestly, can anyone really tell slightly worse graphical quality these days when so many animated movies already look good?
The exception, of course, is James Cameron and his Avatar series. People will absolutely watch something that looks 10x better because the visual fidelity itself is the draw, it's the main attraction over the story. This is usually not the case in most movies however.
The rendering in the Avatar movies is at the cutting edge. But quite apart from the very uninteresting storytellying there's something there that just doesn't work for me visually - I don't know if it's the uncanny valley effect of the giant skinny blue people with giant eyes or what, but I'd definitely rather watching something creative and painterly like the Puss in Boots movie, or even something like the Last of Us with really well integrated CG visuals and VFX that aren't necessarily top of the line, but well integrated and support a good story.
Did you watch in IMAX 3D? I watched in both 3D and 2D and the 2D simply cannot compare to the 3D. The way most 3D movies work is the 3D effects are done after the fact in post-production. 3D in Avatar movies are done entirely in the shooting phase, through 3D cameras. Hence, the 3D in Avatar films is much more immersive to me than in something like Dr Strange 2, which simply could not compare.
I try to find 3d movies but so few are of them are made. And like you say, most of them are automated billboard extractions rather than actual 2 cameras.
I haven't seen the second Avatar film at all; my observations are merely from seeing the first one in 3D and the trailers for the second. I'm aware that it's shot entirely 3D as well. While I was wowed at the 3D effect when I saw the first one, the thrill of that entirely wore off within a week or two and is not a big enough draw for me to see the second. I don't think I'm in the minority here, 3D was huge in cinemas for a year or so after the first Avatar film and then interest from the general public waned as well, probably in part due to subsequent 3D films using the post-production method and I agree the effect is not as good.
3D (including "real 3D") just doesn't seem to be the drawcard though that the geek community seems to think it is - I think the public in general would prefer better story, CG that serves the film and the story etc. And that is why I probably won't see the second - the story is not strong or interesting enough for me, and even the "wow" full 3D effect is not strong enough to pull me back, given the uncanny valley effect of the characters and the lacklustre story.
I'm talking about 3D in the Avatar series specifically, not 3D (including real 3D) as a whole. Avatar has made billions of dollars so far so it's doing something right. But yes, I agree that generally speaking, people like better stories with worse CGI than vice versa, it's just that James Cameron's movies are an exception to that rule.
The exception, of course, is James Cameron and his Avatar series. People will absolutely watch something that looks 10x better because the visual fidelity itself is the draw, it's the main attraction over the story. This is usually not the case in most movies however.