I'm a little late here, but these are my thoughts.
I didn't mind the ending, and this is why: I didn't view the movie as really being about the alien invasion. Given the way that it was filmed -- that it was completely from Ray Ferrier's point of view -- it wasn't supposed to be a sci-fi-heavy alien movie. It was a movie about a dad's relationship with his kids -- the invasion was just the setting. (I realize that that might be a little exaggerated, but the truth is: the movie focused much, much more on the interpersonal relationships than on the invasion story. At most, the invasion was a sub-plot.)
Similarly, when Speilberg focused on Ray and his kids, rather than on the aliens, things were a lot more frightening. The mob scenes, the stuff with the van, the part where Ray can't find his daughter -- all of that was may more intense than when Ray gets pulled up into the alien cage, or when the army is shooting the tripods.
As for Boston, I don't remember hearing early on that Boston had been wiped out. If so, then somebody screwed up. But without that line, it makes sense that the mom and step-dad and grandparents are fine. In the final shot, we see that dozens of the alien tripods have died in Boston -- meaning that they must have been in the process of attacking it as they died. It stands to reason that much of the city isn't destroyed or damaged -- it was only just now being attacked.
(That said, I agree that the son should have died.)
As for the camcorder, yeah that was a mistake. The camera, though, is fine -- you can hear the guy winding it -- all the inner parts were mechanical, not electrical.
And I have to disagree with 42: I thought the cellar was one of the most intense film sequences I've seen in years. (Tim Robbins was a little jarring, though -- not because of his acting, which was fine -- but because he was Tim Robbins, and we, the audience, were suddenly pulled out of the movie to say "Hey - that's Tim Robbins!")
