From a sociological/psychological perspective, the high quality CGI and 3D experience make it more difficult for the human mind to distinquish between fantasy and reality. People have had this sort of response to fantasy for about as long as man has told stories. From the bible to Lord of the Rings (Navi are just blue elves really) to Harry Potter and WoW, people have always latched on to fantasy as an escape from reality. A more compelling experience is easier to believe, and harder to parse from reality.
I'd be less concerned about an Avatar MMO, and more concerned about a 3D implementation of WoW, as the hardware industry pushes 3D displays in 2010.