Return of the King didn't deserve Best Picture either, that was one of the more obvious examples of the Academy giving awards to whoever's "turn it was" rather than to the most deserving nominee. (All the more argument for special awards to recognize the advancements of the form as with LotR and Star Wars) Titanic, on the other hand, earned its place at the podium from a an overall film-making standpoint, even if the writing didn't break any new ground.
Looking at the year RotK won, it sure as hell deserved to win best picture over crap like Lost in Translation, Seabiscuit, and Mystic River. The only other option was Master and Commander, and while I liked it a lot it wasn't as good as RotK.
Titanic was just crap. Its story sucked, its acting was mediocre, and its effects weren't that impressive, just ok. At least RotK was a great story with a great cast, Titanic won because it made a lot of money and it had about 10 minutes of pretty good effects of a boat sinking. Its like Bay's Pearl Harbor but somehow less good.