I love the Oscar/Telly dynamic. I will probably take some heat for this by those who don't like anything Elmo - but i also really like the times when Elmo/Oscar get paired. They're a great contrast in personalities - Elmo's over sweetness mixed with Oscar's over sourness - the irresistable force meets the immovable object!
I really think that Oscar has a grandson/nephew figure in Elmo... and that's one of the things that Elmo is good for. Somehow, Big Bird has a much thicker skin when Oscar calls him turkey, or big canary or something like that... Telly actually sees through Oscar's gruff exterior, allowing Oscar to be sneaky and play practical jokes on him instead... but it seems he's pretty gentle with Elmo. not as gentle as he is with Slimy, mind you... but gentle enough that he retains his grouchiness.
The problem with Elmo is that he actually pairs off better with characters. When he's the central focus, he really doesn't have all that much of a personality, and he comes off as what he is, a 3 year old (with an amazing vocabulary) who's on a TV show and mugs the camera. When he's with Zoe, there's that sort of relationship as children that could grow into something more when they're older... it's pretty obvious in EIG. You gotta love how he HATES Rocko, bringing a darker, angrier version of Elmo out there. I really miss him pairing up with Kermit (but then I missed the personality of Elmo who was that playful) acting very childish to a news anchor. And even with the adults, he comes off as the preschool kid who needs guidance.
That's the problem with an Elmo-centric project or segment, or episode... he plays off of people and others play off of him. He's not what I'd call a second banana, but he doesn't work as well as a character without someone else.