Host Ellen DeGeneres set the stage by noting the diversity of this year's nominees, concluding that without "blacks, Jews and gays, there would be no Oscar .. or anyone named Oscar, when you think about that."
Alan Arkin beat out the likes of Eddie Murphy and Mark Wahlberg to win the best supporting actor award for his role as the heroin-addicted, womanizing grandfather in "Little Miss Sunshine."
The 72-year-old actor, director, author and musician had waited a long time for the honor. He was first nominated for his 1966 screen debut, "The Russians Are Coming, the Russians Are Coming," and again in 1968 for his role in "The Heart Is a Lonely Hunter," but lost both times.
"An Inconvenient Truth," Al Gore's wake-up call on the threat of global warming, captured the documentary feature Oscar. Sharing the stage and the plaudits with the former vice president were the film's exuberant director Davis Guggenheim and producer Laurie David, wife of TV personality and writer Larry David.
Perhaps the most surprised winner of the evening was Ari Sandel, whose "West Bank Story" made off with the Academy Award for best live action short film.
Created as a student project at USC, the 21-minute musical comedy depicts the rivalry between the Israeli and Palestinian owners of adjoining falafel stands on the West Bank.
Their conflict is resolved with singing, dancing and a lot of hummus when an Israeli soldier on one side falls in love with a Palestinian girl on the other side. In his acceptance speech, Sandel pointed to the more serious aspect of his little allegory,
"This film is about hope and peace between Israelis and Palestinians," said the 32-year-old director, whose father is Israeli. "So many other people support this notion, so perhaps hope is not hopeless."
Later in a backstage interview, Sandel said, "My intention was to make a movie that Israelis and Jews would watch and find themselves liking the Arab characters, and that Arabs would watch and like the Israeli characters."
"[Is the film] going to change the world or do anything else? Probably not. But you know, if you can change just a few minds.... I get e-mails from all over the world, from Israelis and Arabs, talking about how much the movie meant to them. That's hopeful, because otherwise there is such a sea of negativity out there," Sandel said.
Israeli composer Yuval Ron wrote the songs and score for "West Bank Story."
In the audience was British comedian Sacha Baron Cohen, but the worldwide audience was deprived of one of his patented shticks as a faux Kazakh journalist, since his nominated adapted screenplay for "Borat" was trumped by the script for "The Departed," which went on to snag the Best Picture Oscar.
The Academy's Humanitarian Award was presented to Sherry Lansing, former head of Paramount Studios and long active in civic and Jewish charities.
-- Tom Tugend, Contributing Editor
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