Oh, the director's cut is definitely better if you haven't read the book. From what I've heard it has more explanation and is more fleshed out so someone without the book's knowledge should hopefully understand it better.
Good to know as I am waiting for my Director's Cut DVD to be delivered today! I had not been familiar with the graphic books, so this is totally new for me. I will always pay a little more for most uncut versions, as I like the something "extra". Most of the time those extra moments can make for a much more interesting movie. I rarely venture out to the theaters anymore for that reason alone.
I haven't read the comic book, when I went to the cinema I liked the film but felt something was missing, maybe some soul. This director's cut made me just love the movie, the characters feel even more human, the 3 hours aren't felt since all the information assembles greatly and is interesting. This cut is definitely an upgrade, if it would have been shown at the cinemas maybe people would have understood more The Watchmen. With this edition, now Watchmen is one of my 10 favorite movies.