Honestly, Avatar isn't going to win any awards for amazing writing.
It is a story that has many times been seen before and yes, I do agree that the characters aren't fleshed out ala Godfather style. There's good and then there's evil. Period.
I don't, however, believe that it was trying to be that so I don't think it's fair to say Avatar was a horrible movie. Or even a bad one. I guess much of it is preference and can't argue with something as subjective as that, but I didn't enjoy The Little Mermaid or Pocahontas any less despite the lack of amazingly fleshed out characters. I saw Avatar as an escapist epic.
Although I agree with much of what has been said here, its faults were not jarring. They did not stand out to me until after I left the theater. Looking back, yes, it was a linear story that was fairly predictable and hard ass soldiers throwing lines like "we'll fight terror with terror". But only in looking back. I was fully engrossed in the story when I watched. I never pulled out to think "ok, bad, bad, predictable, one-dimensional, needs more backstory, needs more fleshing out" etc. And that to me is good storytelling. It may not be good writing. But I think Avatar succeeds in sucking you into a different world completely and in immersing you in the story. I think it's unfair to say that its merits rest solely on the visuals (or as the articles that piss me off -- the "dumb" audiences). Tranformers had awesome CGI. Not as loved, if I remember correctly. Just saying.
