Nate said:

I am sure there is plenty of people who would RUN like the wind to the theaters to go see a full length film.

Movies are very expensive; prints alone, plus marketing and advertising, tend to double whatever the costs were of the actual production. The studios tend to make their money back from overseas sales/distribution and DVDs.

I think Josh's point was trying to create a way for creators of original content to control (not only profit but creative) their own works and also to distribute them using new platforms (e.g. web). He's since added that he see people interested in Doctor Horrible across all platforms (DVDs, TV, etc.) so I do think at some point, some sort of longer form versions of DH make perfect sense. I think its WAAAY too early to home for a theatrical release.

I think what makes more sense and the brothers W may have had in mind originally was some theatrical events (like the theater showings of Once More With Feeling) of DH with audience participation.