So, I'm in the peculiar position of saying that this is--all things considered--one of Pratchett's weaker novels. The Colon-Nobby bit with the Watch is almost painful to me. I suspect that's because these comic stereotypes who have been functioning quite well in their limited, accepted roles are suddenly treated as real human beings. And it's a bit painful to watch Colon's degeneration into something resembling a psychiatric breakdown when he is promoted beyond his capabilities.
I can't even really count the ways that I disagree with you on this. I think TFE is, if not the the best DW novel, certainly among the top 3, even with the desultory Colon-Nobs subplot.
TFE is the first DW book where PTerry truly develops DW as a real world, with real geography, history, politics and mythos. We start to get bits of this in the Lancre books. In "Jingo" we get a Lawrence of Arabia-style view of desert kingdoms. In "Feet of Clay" we learn more about Ankh-Morpork's 'underground' than we have seen previously
But it's not until TFE that PTerry truly develops the "world" part of Discworld. The Uberwald he creates is no longer the Universal Pictures Horror Movie version of "Care Jugulum" but morphs into a culturally rich milleau of races, both sentient and semi-sentient, each with its own history, economic and political battles and conspiracies. The people of Bonk are a full fleshed out version of the 'vampire-dominated' Uberwald city in Carpe Jugulum, with the political structure affecting not the rule of law by intimidation by the powerful over the weak.
Contrasting the "surface dwelling" humans is the rich tapestry of history, mythology and cultural PTerry creates around the dwarfs. When I first read this, I once posted on one of the alt.pratchett boards that I thought the dwarfs, with their emphasis on words, law, suppression of females and factional differences based on the interpretations of dwarfish cultures, were PTerry's allusion to Chasidic Jews, which live in very similar traditions (PTerry answered my post with an email saying me he never thought about this when creating TFE).
The struggle of the Dwarfs is entirely realistic. For once, the humor in these passages--particularly in the scenes where Vimes is conferring with Rhys and Dee--comes from the release of tension rather than from a need for jokes.
And, contrary to what people say about the annoying nature of Carrot in this book, I say that this book represents the transition of true leadership of the Watch from Carrot to Vimes. Even previous books, Carrot continuously displays his kingly qualities--even Vimes is awed by Carrot's supreme self confidence and his ability to effortless win respect. Until TFE, Carrot often serves as Vimes' conscience, keeping the commander's baser impulses in check. Until TFE, Carrot is the behind-the-scenes manipulator of Vetinari, using his leverage as the "undeclared king of Ankh Morpork" to wring further honors for Vimes (and for himself).
The Carrot of TFE transforms shortly after the novel begins. The "old" Carrot begins the book and lasts through the initial investigation into the theft of the Scone of Stone. Once Angua leaves, we begin to see the change in Carrot almost immediately. The 'old' Carrot would never have left the Watch for any reason. The new Carrot does so for reasons he initially doesn't even understand himself, but what we, the reader, realize is, deep down, a matter of love. Carrot is so in love and so obsessed with finding Angua that his normal rock-solid common sense deserts him. He doesn't bring enough food or warm clothes to survive the harsh Uberwald winter. He has no idea what Angua will do when he finds her--if he finds her. He gets himself into trouble and comes close to death, only to be saved from death by Angua herself. Perhaps this is all part of his plan--the beautiful subtlety of PTerry's narrative makes this one of the more touching aspects of the book. But from the moment Angua finds him and rescues him, we know that they will never be separate again, in spite of her surface anger at him.
Now let's turn to Vimes. In "Jingo" Vimes went beyond pure coppering to become a catalyst of world events. He is even more so here. The mystery of the stolen scone (this is not a 'lockbox' mystery at all, since it's quite clear that the thing could easily have been stolen) may seem like an Agatha Christie tale, but its resolution has powerful repercussions for both Uberwald and Ankh-Morpork. Vimes' transformation from a reluctant and often blundering diplomat to a fully confident world-changed who can use his base 'copper's instinct' to overcome nearly all barriers is thoroughly convincing. When he returns to Rhys, Scone of Stone in hand, there is no one in the world who can get in his way.
The other most convincing transformation in TFE is that of Lady Sybil. Until this book, she is more of a parody figure than anything else, the worried, long-suffering wife worrying about her man. Here, she becomes a powerful life force of her own, and her talents, actions and discoveries literally open doors at key moments. For the first time, she becomes his true partner, and, by becoming pregnant, she gives transforms Vimes from someone who sees himself as nothing but a copper to a man who will soon have a larger and meaningful purpose in life, creating the 'ultimate' Vimes of Night Watch and Thud!
There are just so many amazing scenes in this book: The bandit attack, where we first see Vimes's cool-and-collected persona emerge; the entire "game" sequence, ending with the first true emergence of "The Beast" when Vimes is attacking the werewolves in a crazed death battle, shortly before Carrot and Co. save him; the confrontation with the Baroness at the werewolves' castle; Lady Sybil's sudden burst of opera as the gang seeks to bring the Scone back to Rhys; the whole scene where the "authenticity" of the Scone is verified and Dee confesses; the "reward" scene, where Rhys's handshake with Cheery and Detritus literally change the world. And, most of all, the final confrontation between Vimes and Wolfgang, which may be the darkest and most powerful scene in any DW book, and says more about Vimes character than the previous four books put together.
Yes, there are weak bits here. The Colon-Nobby subplot is one of the worst Pterry's ever written. Perhaps he felt he needed to always include Colon/Nobby scenes in Watch stories (as he does in Thud as well), and this one, with its obvious allusion to "The Caine Mutiny," doesn't work at all. The Cherry Orchard/Uncle Vanya bit with the sisters was forced as well.
But, overall, the strengths of this book far outweigh its few weaknesses. It's not 'ha-ha' funny like previous books. It's dark and dramatic, and points the way to the great books that followed it--Thief of Time, The Truth, Night Watch, even Monstrous Regiment, nearly all of which build upon the inventions established here. After TFE, it should be no mystery why PTerry gave up writing Rincewind books and the 'cultural parodies' of Moving Pictures and Soul Music ("Unseen Academicals" would have been a completely different and lesser parody book if it had been written before TFE). While some previous Watch and Witches books had shown glimpses of Pterry's growing maturity and literary depth, TFE is the novel that establishes his mastery of his material.