the downfall of this film was catering exclusively to the comic book fans. of course with the box office take this film is getting there is no chance of a sequel.
Like G-man, as someone who appreciates Watchmen as a work of literature, I'm not especially bothered by this particularly knowing the film is very faithful to the comic. The very last page is intended to avoid a sequel - randomness will prevail and a sequel destroys that randomness.
Prequels are unlikely to do the original material justice, either.
Otherwise, I suspect the movie might do very well as a DVD. The rating on it might have been a deterrant.