Dying may have actually helped his chances. Peter Finch won posthumously, and Henry Fonda was near death when he won for the sentimental (some say schmaltzy) performance in
On Golden Pond
.
The thing is,
Greystoke
was good but it didn't have the prestige of Best Picture nominee,
The Killing Fields
. Being in a best picture nominee helps one's chancesas Juliette Binoche found out when she surprisingly won against Lauren Bacall. (Because a less-legendary actor would not have even Bern nominated for a lightweight film like
The Mirror Has Two Faces
, no matter how good she waseven though I liked it for what it was.
"Well, for once the rich white man is in control!"
C. M. Burns

I don't think anybody was going to beat Haing Ngor that year - although quite what he was doing in the supporting actor category is a mystery - as he clearly was the lead character in THE KILLING FIELDS.
The Oscar voters always liked to give a veteran british knight a nomination every so often - so I think he would still have been nominated even if he was still living.
http://www.imdb.com/mymovies/list?l=32397724