We've all heard the endless lamentations for the pre-digital era, and endless diatribes against all of the CG backgrounds utilized in today's films. And yet as Citizen Kane so ably demonstrates, the notion of filming real actors in front of fake (here, painted) backdrops is old, old, old. I mean, what makes the painted Xanadu any more "authentic" than the painted Naboo? Am I missing something deeper or is this just old-fashioned snobbery at work?
I think that part of it really is old-fashioned snobbery. I just can't think of any other reason to explain it.
I remember watching an interview with George Lucas, the man most often excoriated for "soulless CGI", and he responded to this point by simply saying: "Movies aren't real." I think that's a very important thing to remember. You know Gene Kelly's magnificent titular dance number in Singin' in the Rain? Well, that wasn't a real rainstorm, it wasn't a real city block, and it wasn't even night when they filmed it.
Movies are all about illusion. It's what they are. The X-mansion in the first X-Men film? It was actually the Casa Loma estate in Toronto. Upstate New York in The Last of the Mohicans? Filmed in North Carolina. The planet Tatooine? It's actually Tunisia -- except for in Return of the Jedi, when it's Arizona.
Movies are artifice. Whether it's artifice created by guys building sets out of plywood and spackle, or artifice created by guys making matte paintings on glass, or artifice created by guys making digital landscapes on a computer -- none of that matters. All that matters is the artifice.