Again, I don't see how Muppet Babies and Abby's Flying School are any different. AFFS is about as likely to usher in the CGI replacement of Muppets as Muppet Babies and Little Muppet Monsters ushering in and replacing the Muppets with Japanese outsourced animated characters (or Fraggle Rock's Korean outsourced animation).
Muppet Babies featured reimagined (and obviously much younger) versions of the characters. Whether it was because of the limits of 80's cell animation or a deliberate aesthetic choice or both, they weren't drawn in a way to make them reminiscent of puppets. They were just run of the mill anthropomorphic cartoon animals (or humanoids, or abstracts). A person who was somehow familiar with the Muppet aesthetic but somehow not familiar with the adult versions of the Muppet Babies would probably not have assumed there was any relation.
Contrast that with Abby's Flying Fairy School, and Abby herself is an extremely literal translation from puppet to CG, the only real differences are those you'd expect from the animated version not requiring a human puppeteer. Her face is fuzzy, her arms are "floppy and soggy" and seemingly without bones or joints, just like a hand rod puppet's.
As for why this presents a much more legitimate potential to replace actual Muppet segments than Muppet Babies ever did, that's fairly obvious. Animation from the 1980's looked like drawings brought to life. Even if they'd stuck with existing Muppet characters and used their performers as voice actors, it would have been a completely different feel and concept. Photorealistic hand drawn animation is just not practical, and doing Roger Rabbit style human interaction with it was even less so.
This is no longer the case now that the art of CGI has been getting both more convincing and less expensive for the last 24-ish years. There will be a point in the not too distant future when a computer animated Muppets character will be extremely difficult to distinguish from the real thing, and obviously a CG character can be made to interact with human actors in a green screen. Now tell me, if it reaches the point where you can replace Elmo, Abby, Big Bird, and Oscar with CG versions, do it for less money, and no longer have to find creative ways around the inherent restrictions of a puppet, am I really insane for thinking that the producers will go ahead and make the switch? Add to that the very real potential of public funding declining more or even disappearing, and competition from commercial television continuing to force SS to race to the bottom. Children, like adults, can and do take the time to appreciate quality educational viewing that puts substance over style, and exists primarily to educate and enrich rather than to sell merchandise. But when that has to compete against for-profit schlock that will give the viewer anything they want if it means more ad and merch revenue, it tends to only end one way. Shows on TLC, History, NatGeo, et al that are about Honey Booboo Child, ancient aliens, bigfoot, and tattoo artists have driven brilliant programming like Carl Sagan's Cosmos into extinction. A gradeschooler given the choice of a freshly picked Grannie Smith apple and ice cold raw milk, or else Pepsi and pixie sticks, will all too often choose the latter. The public's [lack of] taste will, in many if not most cases, act as a market pressure to dumb everything down, and intelligent and well made alternatives have traditionally been found primarily in niches where they don't have to compete. Adult live action television was beyond dead until HBO and Showtime, who didn't have to worry about pleasing advertisers, were able to show that people would still watch a good show if it's on. NPR, though not without its own problems, is still infinitely better than the Howard Stern, Don Imus, and Rush Limbaugh variety of offerings on commercial talk radio. Sesame Street was always able to be more daring, more creative, and talk down to kids less because they were working on a fixed budget and didn't have to write every episode with the goal of selling lead-coated made in China toys and neon corn syrup snacks to kids.
If ever an episode of Sesame Street airs where the characters we grew up with exist only in a computer, that will be an absolute tragedy. Even if the animation looks lifelike, having actors and performers unable to actually see the characters and environment with which they're interacting kills any sense of realism. Again, look at the spectacular backdrops and incredible alien/robot characters in the Star Wars prequels, and contrast that with the dull, wooden, lifeless acting. Even with the best actor in the world you're going to see a marked difference between one who can actually see and touch his giant furry monster costar, and one who's saying the lines to Lycra-clad stuntman with tennis balls on his arms and legs.