I believe the first half of S3 is already out on DVD, yes. (We are actually in the middle of a frustrating several-month hiatus, so they've had some time to get them out.) You have other options, too. Alex and I actually watched by downloading episodes from the iTunes store — we have a Mac mini hooked up to our TV. So that was nice in terms of instant gratification. :) And also, of course, they are all available out on the internet in less than legal ways, as well. (The last two eps have only aired in Canada for some reason, which means for us they are so far only available in that way.)

Azula is basically the anti-Zuko, so she's not precisely "deep" in the same way he is, in the sense that he suffers from all sorts of conflicts and she doesn't suffer from any. But I certainly have never gotten tired of her; she's a lot more interesting and colorful than Zhao was, anyway. And it's kind of nice to have a villain who's actually pretty smart and can be seen learning from her mistakes!

Also, is it just me, or should lightning be a special case of air rather than of fire?

Yeah, and if comets are big balls of ice, why should they help firebenders? ;)