Murph, don't know the direct answer to your question about if the theatrical version on blu-ray is better or worse than the DVD or if it just wasn't up to Blu-Ray expectations, but the Extended editions will not only be longer (like you mentioned) but also resolve the issue of quality for Fellowship meaning that it will be the best version out there, regardless if it is extended or not.

Maybe just rebuy Fellowship in extended or something so that you don't have to fully reinvest.
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