Cute is definitely a good thing. :) Honestly, I don't know why a lot of people think that being called cute is so horrible. When he called you cute, he not only was calling you attractive physically, but also saying that you have a good personality as well. Plus, I heard some guys think the words pretty, cute, and gorgeous all have the same meaning, so I wouldn't put too much thought into why he didn't use pretty or gorgeous instead. Don't have second thoughts, you most likely have a chance with this guy. :D
Well whoever told you that isn't the smartest cookie in the world. In my mind cute is better then those other labels. Beautiful/gorgeous/cute. same level to me. Don't worry about a thing. I would give it a shot.