That is, all art houses have a similar setup: small, intimate theater with standard rows of seats. I think I would experiment with the actual setup. Of course, I'd aim for the highest picture and sound setup available- I don't mean that. I'd try out some shit where I'd have a bunch of couches with small tables in front of them. Sit with your friends, put your feet and drinks on the table. Also, for us lone movie-goers, Lay-Z-Boys scattered about or a small group of rows in the middle. Maybe even a few small balcony sections reserved for private groups. Cocktail waitresses, etc. I dunno, maybe there's a reason theaters haven't tried this.

As for the format, I'd show the same stuff most people here would:
-action movie Fridays
-cult-film Saturdays
-oldies and romances on Sundays
-Mon-Thurs: some mixture of new indies, new foreign, repertory, small film-festivals (fave directors, actors, genres). While talking or even yelling might be OK on weekends, I wouldn't allow any kids (18+) or bullshit (hire a bouncer) for weeknights.