Hi Eugene,
I've directed two different productions of this fun play very recently. In the first production we had a single intermission and placed it exactly as Ron suggested. To make the most of this position ensure your actors are aware of the need to create a high degree of tension in the set-up of Claudio by Don John as this feeds into a hanging suspense for the audience. We then returned from intermission with the watch scene. A common feature in my productions is to send out actors for informal, often self-directed, comedy scene at 5 min before interval finishes and in this instance we had the watch, one-by-one, arrive on stage and they had a little skit they had developed. At start of 2nd half Dogberry & Verges burst onto stage forcing a instant end to skit as the watch fall into line.
The other production I did was an outdoor version and we decided to have two intervals (involving moving the audience). The first was after II:ii with the plotting between Don John & Borachio. The audience moved to a tree underwhich Benedick was sleeping off a hangover from the party - when the audience was set, the costumed usher awoke him by pouring the remains of his wine bottle over him for a stuttering start into his monologue. The second interval was after III:iii and the arrest of Borachio & Conrade. This interval worked well as a second interval but I feel it is too deep in the script for a single interval.
Good luck with it - its a fun play.