I do believe that they do try to look for ways to continually acknowledge that there was, at one point, an actual Mr. Hooper who used to run Hooper's Store, whether it's the fact that the store's name hasn't changed after all these years, or the picture Big Bird has of him next to his nest, or anything like that.
But it's interesting that Alan may possibly be a more readily available performer at this point in time, because it seems like for a while there, he was hardly on the show at all anymore, mostly due to the increase in stage work he was doing.
As for the street being empty, that seems to go back quite a bit... at least since the 80s or so. The 70s seemed to particularly throw in a lot of extras in the background, with kids playing in the arbor area, or running up and down the sidewalks, but it does seem like that was slowly phased out a tad by the mid 80s. Similar to how the really early episodes of M*A*S*H had TONS of people walking around the compound in the background making the camp feel crowded before eventually just about the only extras walking around in the background were the recurring day-players (that and too, one early episode said there were 200 people in their unit, but later that number was down to 50).