Joe - I echo your anti-Elmo stance, but I realized something after my kids were born - the average age of the Sesame Street viewer has (seemingly) dropped. When we were kids, it made sense for Big Bird (age 6) to be the audience proxy, but as the audience got progressively younger, it made sense to employ a new character (in this case, Elmo, age 3 1/2). We hated it because of how cloying Elmo felt (especially from a show that made a point of not pandering to its audience), and the aggressive marketing (Tickle-Me Elmo, anyone?) just rubbed salt in the wound.
Coming back to the show now, I don’t find Elmo as bad as I once perceived him to be. It helps that, due to the new 30 minute format, “Elmo’s World” is much shorter (and doesn’t wear out its welcome quite so quickly).