Haha, I had the same experience, where was this infamous blue dong? I immediately grasped and accepted the concept that Dr. Manhattan did not care about clothes, but I didn't even know there was "full frontal" (CG at that) until after the movie, when people were walking out all "Baah! penis! I hate penis!".
It was well done, fit the character so well it didn't distract me from the scene/story/characters. The rest of the move though - woah - not a kid's movie. Neither was the Dark Knight though. I thought this movie was waaaaay better than the Dark Knight. I'd even go as far as saying best comic movie yet.
Don't worry, in the quest to get larger audiences into PG-13, the ratings system will get so skewed that R will become "ultraviolence" and pr0n, and pg-13 will be the regular old killing, torture, and skinemax.