The Oscars seeks each year to pay tribute to the folks of cinema, the history of movies, and the institution of the Oscars itself. Its tools for doing so include the award, their accompanying acceptance soliloquy, live performances, taped homages, and of course, the host. Each of these instruments balance the dual burdens of honoring their subjects of tribute while, in good Hollywood fashion, putting on a show. It is in this context that the selection of Seth MacFarlane was self-defeating from the get-go.
MacFarlane, best known for his less-than-reverent Family Guy and similarly off-color Ted, made his name what it is by being something of the anti-Oscar — dismissive of celebrities, derisive of Hollywood history. Sure, he has a knack for singing standards (one recently manifest with a record album and a host of appearances on the public radio circuit), but it's the several minutes of Peter vs. chicken fights and excessive cutaways that come to mind when you hear his voice. For MacFarlane to be a convincing host required not only a balance between the requisite burdens of paying tribute and putting on a show, but also the added burden of justifying his authenticity in doing so. Seth had to be a host, as well as not himself.
It's unclear how best to navigate those straits — and maybe you can't — but his solution didn't get the job done. From his opening monologue with the future Captain Kirk / William Shatner overhead on screen, to the frequent reactions to his own jokes as such, MacFarlane did not just break the fourth wall. He became its live-action Kool-Aid man. By the time Seth was making an unending series of references to the length of the present awards show, we too were looking at our watches waiting for Ben Affleck to pick up his gold and remind us how he wasn't nominated for Best Director.
The problem with meta-humor and the fourth wall is that you have to ground your production firmly within the first three walls before you can break the remaining barrier and speak directly to the audience. If the entertainment is not itself an initially believable iteration of the convention getting the meta treatment, there's no illusion to break, no shared secret with the audience that you're flying in the face of the medium to communicate directly with them.
Because of MacFarlane's path to fame, his performance as a host was from the beginning of the show a commentary on his performance as a host in the context of his path to fame. Like Seth says, Amy and Tina should just host everything.