Carter has been replaced by Manawatu's Aaron Cruden while Colin Slade will now be the first choice No 10.
Blackadder, who is Carter's coach at the Crusaders, said the 29-year-old would be absolutely devastated not to be able to participate in the tournament further.
"It's bloody awful really. I feel really bad for Dan. I know that he was playing really well and looking forward to this opportunity and everyone will be disappointed for him - which is probably an understatement - but no one will be more disappointed than him, I'm sure,'' he told APNZ.
"But he's a Cantabrian and he's mentally tough and he'll do everything he can to get his body right and come back.''
However, Blackadder said the All Blacks have more than enough depth and talent to win the Webb Ellis Cup without Carter, and Slade and Cruden are excellent players.
"This is going to sound really terrible and uncaring but they've just got to move on. I think there's no point in looking back now. Dan Carter is world class but they no longer have him in the team so they've got to restore all their faith and belief into Colin Slade and Aaron Cruden.
"It's such a big blow but for the sake of this team and this country we've just got to forge ahead anyway.''
Former All Blacks coach and captain Sir Fred Allen said the loss of Carter was a huge blow for the team.
"God that's bad news. It would have to (affect the All Blacks' chances of winning the tournament] because he's the best first five we've ever had, and he's class all the way.
"They've only got to lose somebody like McCaw, too, then we'll really start to sweat.''
Sir Fred said it put enormous pressure on Slade.
"I think he's good - I always have done - but it's a big jump for him.''
However, he still backed Slade, Cruden and the rest of the men in black to win the tournament.
Wallabies coach and former All Black Robbie Deans said he felt for Carter hugely.
"I know how much he hurt after the last World Cup, so he'll be struggling with that right now,'' he said prior to a Wallabies press conference in Nelson today.
Deans, who was Carter's coach in his days with the Crusaders, said the loss of the star first five-eighth would not derail the All Blacks' World Cup ambitions.
"They've got themselves at the ultimate event for the ultimate prize and the ultimate destination for them, playing in New Zealand.
"They won't be short of volunteers, but obviously it's a tough one for Dan.''
Social networking website Twitter was abuzz with reaction, with top trending topics including Carter, Slade and Cruden.
All Blacks prop Neemia Tialata took to the site to express his sympathy for his colleague.
"Feeling for my boi Dan Carter right now.. You train all your life to become an All Black and wait another 4years to play a world cup #Gutted,'' he tweeted.
New Zealand-born Wallaby Quade Cooper also weighed in.
"As much of a war the world cup is you never like to see players missing out on a tournament you work so hard to get to! #feelforyouall.''
Earlier, coach Graham Henry said: "We are all obviously devastated for Daniel. He has worked so hard to be at a peak for Rugby World Cup.
"We will rally around him and pull together as a team.''
In what turned out to be a disastrous day yesterday, first captain McCaw pulled out of the Canada clash with an irritated foot then, later in the day, Carter went down in a heap at training after damaging his groin while goal-kicking.
McCaw is suffering from an ongoing foot problem but is expected to play the remaining games in the World Cup.
- APNZ and NZ Herald Staff
