Learn Finnish: Me istumme teatterissa.

The ending -ssa means 'in' or 'inside'. We use this static location ending because istua (to sit) is a static verb. It describes staying in one place, rather than moving from one location to another.

If I used a movement verb like 'we go', would the ending change?

Yes! If you said 'We go to the theater', you would use the movement ending -iin to show movement into the building: Me menemme teatteriin. But because sitting is a static action, we stick with the static -ssa.

Can I drop the word Me and just say Istumme teatterissa?

Yes, absolutely! In Finnish, the -mme ending on the verb istumme already means 'we'. It is very common and natural to leave out the pronouns for 'I', 'you', and 'we' since the verb ending does the work for you.

Does the word teatteri undergo any changes before adding -ssa?

No, it doesn't. Teatteri is a loanword (a word borrowed from other languages). For most newer words that end in -i, the core word stays exactly the same. You just attach -ssa directly to the basic dictionary word.