I watched Argentina - Uruguay (but missed the Chile match last night) and some of Argentina's play was excellent at times. They're not going to play beautiful football all the time. One game doesnt change everything, and prior to the Uruguay match they also played some good stuff.
Basile is a coach with a definite plan, which unfortunately cannot be said for Dunga. I think this current crop of Brasilian players are very good, there's huge potential there to make a side capable of winning the World Cup. From the games I've seen, the core problem seems to be in central midfield. Dunga has no excuse considering the players he has at his disposal.
Anyway, it's still a long way to go for both teams. Remember how Brasil qualified for 2002 and what happened there.