I am in the minority who thinks the theatrical version is fine. From all I have read, I feel like Joe Berlinger pretty much went in with an attitude of "fuck The Blair Witch Project. And if you like it, then fuck you too!" It sounded to me like he was trying to make an anti-sequel.
I think the studio cuts made it seem more inviting and more of an actual sequel than the 90 minute middle finger to Eduardo Sanchez and Daniel Myrick it sounds like it was intended to be.
I've always thought that Berlinger, as a maker of real documentaries, had a certain level of disrespect for the first film's faux-documentary style. The "sequel" he made isn't a sequel at all, though it was marketed as one. As a stand-alone film it's not all bad, but as a BW sequel it fails. Cut it however you want, that doesn't change my opinion. Then again I could be wrong. You're welcome to try and make a better cut. Have at it.
I am in the minority who thinks the theatrical version is fine.
Even though I wouldn't mind seeing the director's cut, I feel the same about the theatrical version. Difference is, one of the bigger draws for the sequel for me was the fact that it was completely different from BWP.