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On the question of what makes a supporting performance great, using Judi Dench in Notes on a Scandal as a case study.
Judi Dench received an Academy Award for eight minutes of screen time in Shakespeare in Love. The eight-minute Oscar is the kind of result that makes people distrust awards. But the performance she gave in Notes on a Scandal — in which she appeared on screen for the entirety of a two-hour film — is one of the great unrewarded acting achievements of the 2000s.
What Dench does in Notes on a Scandal is give a performance that operates on two levels simultaneously, and you only see both levels clearly on second viewing. On first viewing she appears to be a devoted friend who is profoundly betrayed. On second viewing she is a predator who has been constructing a narrative about herself to justify what she wants.
The screenplay by Patrick Marber gives her everything she needs. But the way she chooses to deliver certain lines — with a warmth that is almost but not quite natural — is the actor revealing the character's constructed self-presentation without the character knowing she's being revealed.
Cate Blanchett is excellent in the same film. Dench is extraordinary. The gap between them is the gap between a great performance and an unnerving one.