Yes, it's a small room (but not as confined as the subs for the claustrophobic) that is located behind and beyond the queue area. Since very few people use it and it actually has room for a fair number of people, there's not generally a long wait if there's any wait at all. You see the whole movie and story that people on the sub see on a monitor, except of course there's no movement. It is air conditioned and makes a great option on a hot day if you're looking to get out of the heat for awhile. Overall, I still prefer to ride the actual sub, but if the kids are clamoring for some Nemo and the line is long, we'll do the alternative experience, and they're satisfied.
As for Peter Pan, we totally love it in our family. We're locals, so we don't do it every time because of the line, but if you're coming for a one-time visit, I think it is definitely a must do. It is the most charming ride of fantasyland for me. I also like the storybook canal boats in fantasyland, although that's not open on magic morning. It may be worth pointing out that quite a bit of the magic morning crowd heads straight for Peter Pan (used to be almost all until Star Tours II opened), and you really need to be at the front for rope drop with a rapid walking pace if you don't want to eat up most of your magic morning riding Peter Pan. If it's a late Magic morning (like right now on weekdays magic morning is 9am), you should probably line up at the gate at 8:15- 8:30.
You'll love it!
