Ithilgore:

Films like Avatar are pushing CG forward and sowing seeds for CG to one day look fully convincing

First of all, I agree with all your post, but one point...

In all honesty, I don't think CG humans will ever work. There is no getting out of Uncanny Valley. I work in this part of the industry, and while some do think it's possible, eventually, I have to say that the majority do not. And nor would they want it to be.

There's an irony in the pursuit of ultimate realism with CG, that being: if your aim is to create a photorealistic human, why not just use a human? Some say "you can get it to do things a real person can't". Fine, then use it for CG doubling, stunts etc, like we already do. What you can't do is nuance a performance in a computer the way a real person behaves. We can probably create photo-realistic still images that could fool nearly anyone. But we are so far away from a realistic moving human, Uncanny Valley isn't the half of it.

Think of what it took just to recreate Yoda in CG. Everything that Frank Oz did live on set back in 1978/9 in a matter of hours and days took many months to replicate in a computer with far more man hours. And it was less convincing. And it was harder to achieve. So what's the point? CG augmentation is one thing, but CG Creation is another.

EyeShotFirst:

I really think that the model ships in the OT minus the garbage mattes, were more convincing than CGI.

I agree completely with that. And now that compositing of live action elements can be done without "traditional" matte lines, it can't look any more real than real. Realistic scale, of course, has to be achieved with models, but as for lighting etc, it cannot ever look more real.

By the way, don't get too excited about the CG in Avatar. I've seen about 40% of the CG for that movie (which equates to about 25% of the whole movie) and yes, it's good. But it's no historical leap forward.