Ok, we finished the movie last night and I have to say it did get better. They stayed surprisingly close to story, including the downfall of Mercutio (this being a children's movie, nobody dies). I particularly liked during this section that they even stayed true to script, with Mercutio asking "Why the devil came you between us" (or however he says it) and Romeo saying, "I thought it for the best." They then followed through on the whole sleeping potion / mistaken for death plot as well. There's no happy daggers.
Mercutio does still bother me, as he goes from being mindless to downright offensive. Correct me if I'm wrong, but I got the feeling from the original text than while he may side with the Montagues, he didn't particularly care about the feud one way or the other. It's not like he was seeking out Capulets to taunt. Here he goes out of his way to taunt them using every ethnic joke you've ever heard. I'm serious. "Hey Benvolio! What have you got when you've got a Capulet buried up to his neck in sand? Not enough sand!!! Hey Benvolio! What do you call a Capulet with one brain cell? Gifted!" And so on. You actually end up sympathizing with the Capulets, who do nothing to deserve that.
Although he is written to marry Juliet, "The Prince" plays more Tybalt than Paris. Even after the Mercutio scene, he ends up playing more of a "Tybalt who didn't die, just got pissed off" character. After all, he also has to be the one who banishes Romeo. Hard to explain without seeing it.
So, not bad. The kids liked it. Heck, whenever they were on script, I liked it. I was supposed to be putting my son to bed right during the Mercutio scene and I couldn't leave the room, I wanted to see how they'd do it.