This has to be embarassing for Lucas and ILM. The original films swept the Oscars (admittedly against lesser competition), while the prequels were completely shut out by more deserving films. Even six (and three) years later, it's hard to argue against the fact that the Matrix features superior visual effects than Episode I did...likewise with Two Towers and Episode II. The fact that Episode III wasn't even nominated is the final insult, but again, the three nominees were probably more deserving anyway.

To me, Lucas and Co. all too often tried to bite off more than they could chew (let's face it, the '99 Jar-Jar experiment was disastrous for a character that needed to be photorealistic) or simply were too lazy and derelict to realize they were foisting visual crap up on the screen (see Yoda in TPM). Deficiencies in visual effects can be glossed over when the story is good; unfortunately, in the case of the prequels, we were subject to some pretty vapid tales. The visual effects became probably THE biggest draw, and so the mistakes and limitations get magnified.

Years ago Lucas was the alpha and omega of special effects movie producers, and there wasn't really even a second place. But other studios learned fast, while Lucas lost complete track of what's important, believable, and even possible in terms of visual effects (to say nothing of the story). The prequels should have been the modern benchmarks for all effects-heavy movies in years to come. Instead they are a somewhat disappointing collection of visual hits and misses.

The snub is justified.