I don't think it would have bothered me that Oshawott lost had there been more to the battle, and Oshawott's track record in battle been better. A longer and closer fight would have been better than what we got and would not have made Oshawott look quite so bad. Oshwott does not have to win every battle he's, but one win every now and again wouldn't go amiss. That so many people clearly expected Oshawott to lose says a lot, whether you like him or not.
I think the reason so many people have come to dislike Oshawott is because when he was caught, we all hoped that Ash would finally have the water-type equivalent of Charizard, Infernape and Sceptile. A water-type powerhouse is something that the writers still refuse do give to Ash, instead teasing us with Palpitoad and having Ash rarely use it.
Unfortunately Oshawott is infact becoming a cross between Dawn's Piplup and Misty's Psyduck: forever young, and a running gag that is rapidly losing its appeal.
As I said before, I get that Oshawott being kept in his base form is a merchandising thing (I don't like it, but I'll accept it) but surely the worst thing that can then be done is make Oshawott appear so bad. The writers porved years ago that a basic stage pokemon can still kick butt. Even though it was unevolved, Ash sending Bulbasaur into battle was something we looked forward to because we all knew that there was about to be a decent fight, win or lose. The same went for Squirtle. And then the likes of Buizel, Corphish, Gible, Totodile and Cyndaquil and Chimchar (before they evolved) we all knew that something good just might happen. With Oshawott, most of us just wait for him to faint so things can move on.
Oshawott is good as a character. Put him in battle and the result is inevitable.