I have great memories of this show and rented it for my boys (2.75 years old twins). They watch a half hour of TV per day (usually blues clues, mickey, or thomas), so I thought they could handle this. While they do like the book, the movie/show was just too much for them, (well for one of them), who was a bit scared of the grinch. He kept asking "why the grinch mean?" I don't think he was scarred for life or anything, but I wouldn't recommend it for two year olds as a result.
Edited to add: A year later, at age 3.5 they really like it and it was no longer scary-- it helps that they've read the book a few times and know that the grinch will eventually be nice-- it made the mean grinch period easier to bear.