That’s funny, I though of the repeated-character motif as a way for Pratchett to explore different sort of stories within his creation. The wizards’ stories are very different from the witches’ stories (which develop into being almost meta-fiction, concerning themselves with stories and how they shape the world, rather than the other way around), which are also very different from the Vimes stories, arguably the most realistic, which are very different from the Susan/Death stories.
As for his running out of ideas… I will admit to feeling something similar, but much, much, much later. I thought Thud! had an unnerving finality to it, like it was the final chapter of something grandiose. I felt that Unseen Academicals, Snuff and Raising Steam in particular were less interesting, even though they were still quirky, charming, and thought-provoking (the image of the bucket of crabs from Unseen Academicals remains with me to this day, and I often think of it when I look around me and see people being put down for striving to be better).
But then again, this is nothing new, and I felt that even in the earlier books there were greats and there were not-so-greats - Pyramids and Eric are two of my least favourites.
What I mean, I guess, is that Pratchett always had less-inspired books (exactly which will depend on whom you talk to, I’m sure!), so I’m not sure that the issue is running out of ideas. Possibly, in his maturity, he wasn’t quite as silly as before. Not only that, as the Discworld itself evolved, it became closer and closer to our world, and suddenly there was less and less space for the Dungeon Dimensions and more and more space for the clacks, the post office, the mint, the steam engine.
Moist Von Lipwig is arguably his most interesting character, not by himself but because of what this character does to the Discworld. It is in the MvL books that the Discworld definitely starts advancing technologically similarly to Roundworld’s technological developments. MvL is a catalyst, and after Going Postal Ankh-Morpork can’t be the same, and this eventually expands to the rest of the Discworld.
As I said, things started to settle. I always felt as though, with and after Thud!, Pratchess was mostly tying up loose ends - most extraordinarily with Esk’s intervention in I Shall Wear Midnight. But he still made me laugh, and he still made me think, and that’s why I loved him.
EDIT - Oh dear me, how could I possibly forget Good Omens? It’s a collaboration between Terry Pratchett and Neil Gaiman. It’s probably the mustest-read must-read of them all. If you never read another Terry Pratchett book, read Good Omens.