Both my brother and I spent a good 15 minutes looking at it on the 62" HDTV. From one angle, which appeared to be the upper right camera, it looks like his foot cam down out of bounds, but, when it comes up, the divot left is clearly in bounds.
Looking from another angle, which appears to be the Cards end zone at the time shooting down the sideline, it appears that the entire foot comes down, then the heel up, then Smith pushes off of the toe of his foot, thus leaving the in bounds divot.
Go here: select the Steve Smith highlights for the game, and watch from about 2.30 on to about 3.20 - it will show you everything I was talking about.
The announcers stated that it was clear Smith was out of bounds before the challenge was called. After the challenge was dismissed, one of the announcers stated that "Steve Smith must have the strongest arch in his right foot known to man."
We got hosed on the play. It's apparent when looking at all of the different angles and combining them together.
[edit] - 2.36 - replay showing location of foot above.
2.56 - field level camera shot showing Smith's entire foot was down, not just his toe.