I liked Avatar and am at least interested in the story that the producers are working on a sequel. That being said, I see huge, possibly insurmountable problems for a sequel. It's well known and, to my knowledge, never been denied by James Cameron or anyone connected to the film that Avatar was, to put it politely, modeled after Dances With Wolves. The problem for Avatar is that it has no sequel. There is no Honest Injun: Dances With Wolves 2 for them to rip off. Luckily for James Cameron and 20th Century Fox, I exist. They should really be thankful for that fact as I am now offering them some ideas which they can use free of charge unless they actually decide to use them in which case they must pay me.
Empire -- Jake Sully and the Na'vi encounter an evil Galactic Emperor who commands a mystical force called the Brunt. Jake must master the good side of the Brunt in order to master a weapon called the Glow Blade and use it to beat the Emperor. There's a twist: the Emperor...IS HIS FATHER!
Sex and the Hometree -- As Na'vi society becomes more sophisticated, Neytiri and three of her girlfriends become sexually aggressive functioning alcoholics who bitch endlessly about how none of their men service them properly in a way that makes them sound like gay men.
Fly Hard -- Jake must once again tame a Toruk to become Toruk Makto when a group of terrorists/thieves take over Hometree in order to steal a cache of Unobtainium.
Precious Unobtainium, based on the novel Push by Sapphire -- A girl who is the object of derision because she is both fat and a really dark shed of blue becomes a psychopath determined to kill the other Na'vi (deviates from the novel a bit).
The Day Pandora Stood Still -- An alien warns the Na'vi to end their warlike ways and disables their technology to demonstrate his power. As the Na'vi don't use advanced technology, they come to realize the alien is either stupid or insane, pee on him a few times and ignore him.
Ava-Hard -- If they're really desperate, they can just rewrite Avatar as hardcore porn with Jake Sully as a plumber who drops by Hometree to "install 14 inches of pipe" and ends up connecting his tentacle-filled ponytail with Neytiri's.