The production companies decide which categories their movies are entered in. In this case, the producers evidently thought Streep and Julie and Julia would have a better chance if they didn't go up against the heavy hitters in the more prestigious "Best Movie" category. By the same token, Up in the Air should have been in the comedy category, but since it was the best movie nominated, why not go for broke? It certainly didn't deserve to lose to Avatar; I'm with Austin on that. Avatar is a stunning visual achievement, truly cutting edge, and that should be recognized. But it was not the best movie.
David, are you reading this? Do you still dislike George Clooney?
Now, I have a confession to make. I went back to see Avatar again. A friend wanted to see the 3-D version, and I was curious enough about it to go with her. And guess what? It's not exactly the same movie as the regular version; there were a few slight changes.
First, that silly transport vessel with the bottom-mounted thrusters -- the exterior of that ship was not shown at all. We saw the interior and the pilot's view of the compound during the flyby, but no view of the burners. That was an improvement. Also, there was only one shot of a Na'Vi "aiming" an arrow incorrectly; all the others had been cut. Sigourney Weaver had a death scene that wasn't in the other version. CCH Pounder's role was enlarged. There were additional shots of the big tree's destruction. Probably a few other changes I didn't catch. But the 3-D was great; I'll echo Pete's "Wow!" here.
Chris, what did you think of The Book of Eli?