The TV producers made him wear the suit, you can hardly have a naked blue man parading around on daytime TV now can you...
I seriously don't get the fascination with Dr Manhattens penis, it was only in a few scenes but everyone seems to be making out that it's always on view in every scene of the movie. It's a penis...get over it.
And the film is good, but to fully appreciate it you've really got to have read the comic, otherwise you'll probably feel that it is a bit overlong (whereas fans of the comic understand why it had to be so long). That said, my friend who had never heard of the comic enjoyed it immensely.