CG and the Suspension of Disbelief
There's an important term in filmmaking: "suspension of disbelief." It was first coined in 1817, and it refers to an audience's willingness to accept, say, laserbeams and lightspeed, for the purposes of "going along for the ride," emotionally.
As good as the human eye is for spotting artificiality, we're more than willing to stay in this suspension so long as nothing enters the frame which destroys it. Without this suspension, we couldn't watch cartoons, where nothing is real. But you could never mix the stylized world of cartoons with actual real photographic imagery and convince a viewer they were one in the same. You can do things like Who Framed Roger Rabbit, where such elements co-exist, but you can't convince the eye that they're of the same nature.
There was no CG in 1977 when Star Wars was filmed. Just photography. There was primitive bluescreen photography, and miniature photography, but it was all photography of real objects. The CG insertions into Star Wars don't blend with the look of the original photography, so they destroy the suspension of disbelief. Your eye immediately recognizes the new elements as being out of the relative reality you've been experiencing... and this takes you out of the drama.
Some of it is the nature of the beast: photoreal CG extremely difficult to attain. It used to be a visual effects-person's nightmare to hear, "Looks fake." Today however, with sometimes 2000 visual effects shots to be produced in a few months' time, there's no way to give every shot the time and resources necessary to really get it right. So gradually, audiences are being trained to accept a lower and lower standard of believability, to the point where today, people actually say, "Good effects," in praise, not realizing that once, you weren't supposed to notice; you were supposed to be engaged in the story. You were supposed to remain in the suspension.
I remember the ad campaign for the first Superman movie: "You will believe a man can fly."
The filmmakers realized that this was the key to the movie; this was the core of the suspension of disbelief. And dramatically, if you bought it, then you were in for a ride. By today's standards, the effect doesn't hold up, but it did then, and audiences ate it up. Today's superhero movie is Spiderman. Spiderman never bothers saying, "You will believe a man can swing from webbing," because the CG is entirely unconvincing. Filmmakers learned to put a spin on this in the last 10 years or so saying, "it's stylized... it's a comic book come to life..." Let me tell you, visual effects people never wanted to have excuses made for their work. It was always supposed to look real. But you can't make it look real when you've got 2000 shots to do, trust me on this. It's getting easier, though - movie after movie with substandard effects are training people not to know the difference anymore. Spiderman didn't make any shortage of money, did it? And nobody cares that it's not Tobey Maquire swinging on the web. Nobody cares that it isn't even a real person swinging, or a real city he's swinging in. But imagine if they did! Imagine if you actually believed a dude jumped off a skyscraper. Now that's suspension of disbelief. I consider it a missed opportunity.
All that being said, creating photoreal CG that blends with photography is possible, it just wasn't done in this case. And more to the point, it didn't need to be. More on this here.
As an aside, when people tell me Spiderman is a great movie, I ask them if Raiders of the Lost Ark was a great movie. They say, "YES!" I say, "Sing me the theme to Raiders." They always can. Then I say, "Sing me the theme to Spiderman." They can't. $100 million-dollar-plus movie, and not one person, musicians included, can get a note out. Then I ask them to imagine Raiders without the music. Unthinkable, right? Things have gotten so bleak out there that you can take away a good musical score, easily responsible for 70% of the drama in a movie (you can argue this, but you'd be wrong), and people still love it. It's sort of like giving people a choice between eating a bowl of wood chippings and a bowl of gruel. If it's all they've got to eat, they'll eat the gruel every time; that doesn't mean gruel is good. That's Spiderman: a bowl of gruel in a world of woodchippings. (I'm a professional, don't try these analogies at home.) Plus, Tobey Maquire's no Harrison Ford. Nevermind, go back to sleep...