Now that I have seen the movie (thanks to the used DVD bin at Blockbuster) I'm in a better position to appreciate what the disagreement was about. I totally see Su’ad Abdul Khabeer's point about the film. It's portrayal of African-Americans in rural Georgia was definitely archaic, stereotypical and problematic. And in spite of the criticisms which can still be made about how Hollywood deals with race, one would be hard pressed to find a contemporary American film which portrays Blacks in such a fashion.
But My Name is Khan, is most definitely not an American film It is an Indian-centered film for an Indian audience. So even though most of the film was set in the United States, most of the dialogue was in Hindi or Urdu and most of the subjects/agents in the film were of Indian descent; Indian store owners, professors, motel managers, news reporters, and doctors, etc. (so "of course" the African-American characters will be poorly fleshed out stereotypes).
In fact, it wouldn't really be correct to call it a "pro-Muslim" film. From an early scene in the movie we see Rizvan Khan's mother teach him explicitly that there is no difference between Muslim and Hindu. There are just two kinds of people in the world, good people and bad people. And so we see many examples of "bad Muslims" (e.g. a terrorist recruiter speaking in a mosque, a Muslim couple who are too embarrassed to pray in front of non-Muslims, Rizvan's jealous and then estranged brother Zakir) and good non-Muslims (Rizvan's Hindu wife and stepson, the white couple who befriend them, different Sikh and Hindu Indian-Americans who support Khan on his journey). In fact, we see many more examples of Hindus and Sikhs being victimized in the post-9/11 environment than we see of Muslims. (And African-American Muslims are absent).
Basically I think our evaluation of the film depends entirely on where we choose to set the bar. If we want to compare My Name is Khan to more typical Hollywood portrayals of Muslims (see planet of the arabs) then of course we would say that MNIK is wonderful. And I would actually say that, except for the scenes involving African-Americans, MNIK is basically a fun, entertaining, Bollywood film. But if we demand a higher degree of excellence, and especially if the film is to receive an award from a major Muslim-American organization because of its "courage" and "conscience" I think it is fair to hold the film to a higher standard. And by that standard, the other winners of the 2010 MPAC Courage and Conscience Media Award were more deserving.
In fact, looking at past winners of the award, I'm tempted to think that some other cultural productions and performances are more deserving... Don Cheadle in Traitor for instance or Keith David as Abu 'Imam' al-Walid in the Chronicles of Riddick. Some more controversial alternative choices might be Amir Sulaiman, the film New Muslim Cool, Mos Def and K'naan on Austin City Limits, Lupe Fiasco and others. Lets hope that MPAC is more "courageous" when it gives out awards in the future.