I have to admit, in order to improve my opinion about this particular episode of Masters Of Horror, i had to watch it a couple of times. I think it has a great story, with definitely a lot to it, and with a few extra points thanks to good acting and a creepy soundtrack.
So, about the argument. Thought it was awesomely original, i mean, it's not new that certain movies/books/games/other objects have some sort of curse or something like that (like two episodes of the following season, Pelts and Valerie on The Stairs), and make people go insane or bring dead myths to life. Yet, the story in Cigarette Burns is consistent, beautifully done (helped by special effects and characterization - i mean, look at that sacrificed angel), and creepy. I was thinking about that for a week, c'mon - nowadays that is freakin' unusual. Anyway, i think the argument of Cigarette Burns has definitely a lot to it.
The soundtrack fitted perfectly on the episode, bringing a whole new atmosphere to it. Also, there were a few details that i though were awesome, like the Saw II movie poster on the theater wall. There was only one little detail that i thought was a totally WTF? moment for the episode - what was the deal with that ending scene where the daughter/girlfriend appears totally covered in blood, Carrie style ? I liked the reference to the classic movie, but i thought it didn't add anything to the story, except, of course, for the fact that this happening in particular follows the line of the episode - both characters watched "Le Fin Absolue Du Monde" and went insane (just like the dude who put his lower intestine on a reel, and the Asian servant who saved the angel). And also, i thought the story was a little bit incomplete in the end (we'll never know what happened to the fattie friend).
Overall, i think that John Carpenter had an amazing performance while directing this episode. It's disturbing, gory, scary and made me think. I totally advise it.