Bumping this thread 2 years later after we witnessed the inevitable results.
And I think that sums up accurately what ultimately did happen.
Leno, while funny, is ultimately less a comedian's comedian than a talk show host (to paraphrase Lorne Michaels). That meant that he fit perfectly into The Tonight Show because it's prime audience is that that isn't really looking for humor that's too weird or esoteric. WHen Conan went in, he did as good as he could do. But ultimately his humor ended up going over teh heads of much of the Leno raised audience and that's why the rating began bottoming out.
Conan on the other hand started out as a comedian and has remained a comedian. Same goes for Jon Stewart. They both offer topical humor (Stewart's has a smart Spy Magazine style edge to it).
Late Night had guests and so does the Daily Show. But the prime focus of both shows is the comedy. On the Tonight Show, the comedy is only part of it. I suspect that Conan also ended up being somewhat constrained by The Tonight Show format. His TBS series allows him room to run free again.
Letterman I always prferred over Leno. Yet I agree with previous comments that it always seemed like he wasn't being given the chance to really cut loose and his humor often has a defanged feel. On the whole, he's quite funny. But I think he would do better in more of a comedy show than a talk/comedy one.
The main issue is that the late night comedy/talk show field on the whole has more failures than actual successes. For every Stewart, Conan or Jimmy Kimmel you have 5 Keenan Ivory Wayanses. Apologies to the lucky few who remember The Chevy Chase disaster of 1993. It's hard to believe now that for about 2 months in the summer of 1998, someone thought that a Magic Johnson hosted talk show was actually a good idea.
To sum up, I think things have gone (in a roundabout sort of way) to the best possible destinations for both Leno and Conan.