Theatrical Ending Is WAY Better Than the Alternates!
Here's my review of the three endings (found on the DVD).
1. Alternate Ending 1
The best part about this version is that it's awesome to see the Watcher! But aside from that, there were tons of problems: to put it gently, Karen is kind of weird-looking. I actually thought it might've been a man in drag. She has a strange face and never talks...then when reunited with her mom, there's a hammy, running with arms wide open scene (now THAT's a Disney-ish happy ending if there ever was one), and finally an ending where Jan gives an anti-climatic explanation to Ellie about everything. Too much sci-fi talk and not enough action.
2. Alternate Ending 2
An extended version of the same ending as above, which means it has all the same problems plus some new ones. The visual effects for the "other dimension" I understand were never finished, and it does look sort of Michael Jackson music video-ish. There's also an added scene of Bette Davis's character warning Jan's mom to stop the seance, but when we see her again later, her hair and her dress is completely different. I guess that's probably why the scene was cut in the first place.
3. Theatrical Ending
Perfect! Don't bother recutting it. The only downside is that we no longer get to see the Watcher, but to see a possessed little girl is just as dark (considering it's Disney), her explanation is done in an interesting way, unlike the alternate, Karen looks somewhat more normal, and her reunion with Bette Davis is done just right, emotional but not over the top like before.
So that's that. If there was ever a time where a studio was right in choosing a new ending, I think this qualifies.