Had Avatar swept last night, it wouldn't have imparted greatness onto the film, even if the Academy of Motion Picture Arts and Sciences declared it the "Best Picture Ever." Similarly, The Hurt Locker is a great film, it was before the awards were announced as it remains afterward.
The Oscars merely show how Hollywood regards its own output. An Avatar win would have revealed the preferences of those who make movies; it would have shown they value "bigness" over "artiness" (I know this is a gross oversimplification, but it holds a kernel of truth), and would have pointed to where Hollywood would be headed in the next few years. (Witness the aftermath of Chicago's win in 2003, at the flurry of musicals, mostly bad, that resulted.)
So David bested Goliath last night, and that's a good thing. The Hurt Locker was not the best film last year (that's a toss-up between Inglourious Basterds and Up), but it's the kind of movie that Hollywood produces too few of: small, honest pictures that don't aim to be Oscar bait, but end up achieving greatness. No doubt many will grouse that the Academy continues to be out of step with actual moviegoers, that it celebrates elitism over populism. After all, Avatar was the highest-grossing Best Picture nominee, while The Hurt Locker was the lowest.
However, it wasn't Avatar's bigness that made it undeserving of the win. It was its derivativeness, its hodgepodge of obvious sources that never gelled (not to mention its cringe-worthy dialogue, and its two-dimensional characters). Look at Cameron's previous film, the Oscar-sweeping behemoth, Titanic. It shares many flaws with Avatar. But there is pathos at the center of its spectacle that transcends its many failings. It deserved its Oscar jackpot.
I don't like James Cameron (I felt an abundance of schadenfreude at his defeat), yet I would never argue that he's anything but incredibly talented. Still, his loss last night represents a source of hope for those of us who love movies. Spectacles will continue to be made: Avatar's box office receipts will guarantee it. But maybe now studios will take more chances on smaller films that seek to be great on their own terms. We're all winners.