3- contemporary representation
In Baldur's Gate and Shadows of Amn this diversity is still well represented. Some companions have that big eyes and high cheek bones combo but the two elvish villains are rather different. Even the one who should best represent her race, the queen Ellesime looks like a luscious human.
Paper publications show diverse models too.

So why is there a shift towards more angular and triangular faces in the early 2000s?
From the artistic standpoint the pattern is clearly not new, roswell like creatures, star-trekish influence, vampires etc.
The choice is not particularly original. Again the need to look alien and spooky.
In DnD, this is not a driven by the existing lore. And why just elves among the playable races. Other races on Toril are as alien as theirs (dwarves).

My personal interpretation is that one of the root causes is technology driven and not a sudden artistic preference.
The pnp publications, literature and artworks have no need for such constraints on their creativity.
However at 3e and 3.5e release time, the video game industry is fond of 3D games. For the DnD owner this is a distribution vector and a market segment of growing importance.
The graphics engine performances were rudimentary. Where a 2D engine always succeeded in differentiating the races with just the size and build as variables, those 3D engines required more. The old 3D processing capabilities leave no room for fine distinction. Just using pointy ears would have been too subtile. Redesigning the whole face in a drastic manner clearly helps.
Maybe it is also the opportunity for a new setting to leave its mark but we know what became of 3e and 4e...

For instance, have a look at the difference between the npc portraits and their 3d in-game models in the original Neverwinter Nights game.

15-20 years later, things are much different. Personally I welcome Larian's rollback to human faces of any type because I do not see those triangular options as an enhancement to the global aesthetics value. I am okay with pointy ears and the absence of facial hair as the main distinctive features.
This being said, I think the whole thing is a minor point in my overall gaming experience. I can get over with cosmetic options I dislike and I do not feel the narcissistic urge to be represented in a video game.