I have most of his books Apart from some of the later ones about football and trains etc. This has indeed become an interesting discussion. I have a problem with cutefying DnD creatures though.. Where does it end? Aww poor mindflayers, just doing what they do poor wee things.... :O No!!!!!!! They are monsters!!!! Kill them with fire!!!!! And so on.
Steam and Unseen Academicals were good, but a slight shift of gear. They were evidently books that Pterry felt the need to write due to his own interest in the subjects, but you could easily skip them and not miss out on the wider Discworld Lore.
As for rehabilitation of fantasy monsters; yes, I think it is a dangerous slope to start on. If you have 'humanised' your main evil race, then your next Evil needs to be demonstrably worse. I prefer to give my campaign monsters good old-fashioned human prejudices and flaws, without making them human. In my GURPS Fantasy campaign, you can try to negotiate with goblins but they will likely just laugh and eat you - they see all other living things as food. Orcs are more 'civilised' and will trade, but are highly clannish and xenophobic and will start a fight at a moment's notice with the slightest excuse.
Well, you coul argue the major plot point of the last books was the whole humanization of orcs and goblins thing. I was not a fan, but I got the gist of it, and I think it is worth noting. In the end, how do you find out about others if you do not ask nor try to understand?
There is this secluded tribe on the Andaman islands, just off the coast of India, that will attack anyone that comes close to them. They have been left alone for decades until two years ago an American got killed trying to talk to them about god. They are hostile on sight. Some tribes in South America are similar as well and might raid lumbercamps even. Japanese Holdouts after WWII also either lived isolatory and secluded or showed aggressive behaviour years after the war was over. Now obviously the right thing is not to annihilate these tribes and people, but to either leave them be or talk to them so one can come to some form of understanding. I do know that these comparisons are a bit shaky, but it begs the question if anyone ever saw it from the POV of the goblins or tried to understand what they are all about.
This rehabilitation happens all the time, though in many series and in real life. Former adversaries become neutral, become new allies, even if a mutual understanding was outrageous a couple of years ago. Again, 100 years in the past, the Bhaalspawn had a Goblin companion. Drow seem to have little issues walking above ground, except some small remarks and so forth. So it is nothing out of the ordinary to at least question their motives, yet there isn't really anyone asking these questions, beside Volo maybe.