Well, last night confirmed my "too scary" opinion. My now 5-yr old DD made DW take her out of the show during the Pocohantas portion, and she loves Pocohantas.
Yes, the volume is a big part of the problem. If your child is sensitive to loud noise, then you'll have to either try earplugs or skip it. It is LOUD.
But the intensity of the villains is also a huge problem for a lot of kids. They are projected in larger-than-life size on the water screens. Also, Jafar's snake is immense (and realistic) as it threatens Mickey, as is the dragon. These are incredibly impressive effects but, of course, that means that they seem incredibly real to little ones.
As always, you know your own kids best. I saw many young kids walking out after the show, apparently none the worse for wear. But DW also saw large numbers outside the theater with one parent waiting for the rest of the family to finish watching the show.