Personally I think it is still to early to be having a live action adaptation of the Naruto franchise but we might receive one from Lionsgate, so what would you like to see in a live action movie in order for it not to suck like the Avatar or Dragonball movies did?
Personally I would set a few rules in order for this project to not completely collapse on itself.
1. Do NOT go any further than the "Land of Waves" arc in the story. This will allow us to be properly introduced to Naruto, Team 7 and the ninja world that we have become accustomed to. This should tell us why we should support THIS Naruto and be willing to follow his adventures. This will also be good, since the fights in this arc would not require a 1 Bilion dollar budget that Lionsgate are simply not going to give this movie.
2. Keep to the source material. DO NOT EVEN THINK ABOUT making Naruto your average american boy who happens to have ninja powers (looking at Dragon ball: Evolution here). Just make this ninja world work, or don't bother with the movie at all. The only think that may have to be changed is the age of the character, as a thirteen year old (140 cm tall) may not look convincing on the big screen.
3. Make the main fight between team 7 vs Haku and Zabuza rock! The anime generally brings the fights in the manga to life and sometimes even makes them better. That is what I would expect if we are going in to watch a live action Naruto movie. There has to be at least what we saw in the anime, and even expand on the fight if they have the time to.
If by some miracle, this movie is successful than a trilogy could be made of the original series.
1. Prologue/Land of waves
2. Chunin exams/ Konoha crush
3. Search for Tsunade/ Sasuke retrieval arc.