I'm part of the first generation of Sesame Street watchers and I currently watch with my daughter, who is three (the age I've tuned in when the show first went on air). Elmo definitely helped Sesame Street "jump the shark" not just because of his political correctness but the fact that the last 20 minutes of the show are all about "Elmo's World".
I agree about the revelation of "Snuffy". It was a lot COOLER when Big Bird would talk about Mr. Snuffalufagus (I REFUSE to call him "Snuffy") and no one would believe he was real.
But the one jump that no one really talks about is that there is a lot less human interaction on the show. Being first generation you would ALWAYS see Gordon, Susan, Mr. Hooper, Luis, Maria and Bob in different parts of the show...and often. Now, you are lucky to see ONE human and perhaps a small skit. Elmo hogged up the show so that definitely helped in the reduction. The only human "guarantee" is "Trash" Gordon and thats at the end when he gives the letter and number of the day.