Oscar the Grouch is no longer "appropriate" for small children. Why? He's obnoxious. Well, that's the whole point of Oscar. He is a negative role model. He demonstrates that if you are rude and mean, it makes it hard to get along and people won't like you very much. (An interesting point about Sesame Street is that it's a tight-knit community and includes everyone, even Oscar despite his temper. But people still make it clear that his behavior is frowned upon.)
The Cookie Monster is no longer "appropriate" and has, from what I've heard, been transferred to a more nutritious diet. But the whole point to this character is that he was greedy, was a ridiculously picky eater, and had no self-control. He demonstrated the vice of gluttony.
Small children need negative role models as well as positive ones. They are just starting to learn what self-control is and that it might be a good thing to have. This is why so many fairy tales and children's stories have characters who break rules and do dumb stuff -- so that hopefully kids can learn from someone else's mistakes. Taking those away and leaving only sweetness and light is not helpful.