Has the Five Picture Best System Always Been a Mistake? Yes

Between 1944 and 2008, the Oscars were reduced to a paltry five Best Picture nominees per year and the competition for those slots was intense. 

In the "races" leading up to Oscar Nomination Day, two or three films would establish themselves as clearly belonging:
2000: Gladiator-Traffic-Crouching Tiger, Hidden Dragon
2001: Lord of the Rings
2002: Gangs of New York, Chicago
2003: Mystic River, Lord of the Rings, Lost in Translation
2004: Aviator, Sideways, Million Dollar Baby
2005: Crash, Brokeback Mountain
2006: Departed, Babel
2007: No Country for Old Men, There Will be Blood
2008: Slumdog Millionaire, Milk. Curious Case of Benjamin Button

After those two or three, it was a disaster. The list of films nominated for BP in the 90s included Awakenings (about as dramatic as an episode of ER), Godfather III (considered to be a disappointment), Four Weddings and a Funeral (80% of Jon Cusack romantic comedies have more to say than that film), Il Postino (clearly has been forgotten: I just asked eight of my facebook friends if they've heard of that film: ZERO said yes), Secrets and Lies (I got one of eight on that one), Babe (how many films were influenced by that? I think Homeward Bound 2 and Zookeeper was the only other film ever to use the formula of talking animals), and The Fugitive (decent for an action film, but even a good action film today like "Source Code" or "Adjustment Bureau" is not going to make the Oscars). 

The biggest danger to the credibility of the Oscars is films looking like TERRIBLE in retrospect. For example, if  I learn that classics like "Easy Rider" and "Wild Bunch" weren't nominated for Best Picture at the 1969 Oscars, I'll be disappointed but I'll usually assume they were too radical for their time and legitimately good entries took their place. However, if I look it up and find that "Hello Dolly" and "Anne of the Thousand Days" took those slots instead, well, Academy, you've got some 'splaining to do!

When a bunch of films are going for that final spot, the Oscars are very prone to making the wrong choice. As seen in "The Reader", "Atonement", and "Chocolat", genre bias will always kick in: Period pieces, biopics, and pieces set in Britain will often win out over a variety of other genres (explaining why James Ivory, Stephen Daldry, Stephen Frears each have directed three BP nominees). The low point was probably "The Queen" which was an entire film devoted to whether someone should read a press release.

Ten years in, we've seen such tremendous genre diversity, that the number of films that the ambitions of film makers from a wider range of genres now has a chance of being able to be rewarded prestige. These films include:
Serious Man-A grim black-comedy rooted in deep philosophical underpinnings or none at all (depending on who you ask)
Martian, District 9, Gravity, Her, Arrival-Science-fiction ranging from adventure-oriented (Martian) to hard-core (Arrival) 
Beasts of the Southern Wild-A cross between fantasy and science fiction
Amour-A foreign-language love story
Django Unchained-A spaghetti western set in the South (genre film maker Quentin Tarantino's stats have fared much better in the 10-picture era statistically)
Call Me By Your Name-A queer love story stylistically in the mold of a European indie film
Black Panther-Alas, a comic-book film!
Up, Toy Story 3-Cartoons. The only other time an animated film made the short list was "Beauty and the Beast" in 1991
Shape of Water, Boyhood, Black Swan, Inception, Grand Budapest Hotel, Black Klansmen-Auteurs like Guillermo del Toro, Darren Aronofsky, Spike Lee, Richard Linklater, Spike Lee, and Guillermo del Toro who wouldn't have broken through in the past have benefited and often won big at the Oscars with an expanded field. 
Room-Somewhat of a horror film in the first half with an experimental structure by auteur Lenny Abrahamson


In the years before the Academy expanded its field:
 
Almost Famous, Mullholland Drive, Memento, Royal Tenenbaums, Far From Heaven, Adaptation, About Schmidt, Road to Perdition, Eternal Sunshine, History of Violence, Children of Men, Pan's Labyrinth, Dream Girls, United 93, Into the Wild, Sweeney Todd, Wall-E, Dark Knight, and Wrestler all had a good chance of being included if they expanded the nominee slate.

Would it have made up for questionable choices like Chocolat? Most definitely. I think more movie fans were happier with 2011's choices than 2000 because all the good nominees were included and Extremely Loud and Incredibly Close (according to RottenTomatoes.com, it was the lowest rated 21st Century BP nominee at the time) will just be seen as a quirky anomaly in retrospect.