I'm sure there's some report out there from 1969 justifying the episode count, but really, I have no idea why they chose to do 130 episodes a year. I think they should've knocked that down ages ago - more money for better shows (I mean, presumably more money).
Agreed. The 130-episode count, by Season 3 or 4, consisted of 20 repeat episodes from two seasons ago, and I personally think the scenes were more about teaching kids the fundamentals, sometimes with a song, while the latter two scenes were linked together for a short storyline. At least the show did get their act together by the latter half of the 1980s when all of the scenes would link together to form a full storyline, even though I never cared for that format, but I may be in the minority for my comment.
I think the show was better off airing fewer episodes in a season, airing once per weekend, in the first place. Something that wouldn't happen until the HBO deal took effect. I don't know why there were hour-long episodes filled with mostly inserts and animated segments by the time the 80s rolled around. In the initial seasons, there were so many street scenes, but by the 80s, you would have, at season's prime, five or six street scenes max.
I think episodes with fewer street scenes would be commonplace by the final two months of the season, as I observed in several episode guides for the episodes aired in March, April and May - particularly with Season 13. It was becoming more and more common for an episode to start off with a recycled street scene (labeled an insert) or a cast or muppets segment, and then multiple segments before the first street scene of the episode.