Azula is probably going to seem toned down a bit in season 3. Throughout most of season two she was so far ahead of everyone else in terms of skill and power that she seemed unbeatable in combat.
Now however a lot of the characters have caught up, Katara we now know can at least match her when she has enough water, judging from the way he fought in the finale Zuko is getting closer to, now that Aang has gotten the hang of earthbending he is also presenting her with a challenge. And she hasn't even faced Toph yet who would likely be a match for her as well.
We have gone from Azula holding off the entire group by herself to her having to struggle against each one by themselves

From now on I think we can expect Azula to do more work through manipulation and cunning than simply brute force like she had done in the past.

If Azula dies, i would be just sad i mean i hate her, "i despise her" but, all that talent wasted and gone just seems wrong.

I still say that the creators have not made this twisted enough if Azula is to become good it should be because of something twisted like she falls in love with katara. NO wait a bloody minute, Azula falls in love Zuko, but their father captures him and drags him back to the firenation. Azula then joins the avatar and teahs him firebending to help get Zuko back.

The end of Azula's reign will ocurr when she's killed or betrayed.