Yeah, I think that people are WAY over thinking this "elf on the shelf" concept. We have always constructed the existence of some sort of "all knowing" entity in our societies, this isn't a "new" thing. The Elf on the shelf is a parenting tool, that's it. Kids have the ability to "believe" in things that later in life, they'll not be able to. My daughter thinks I'm a Jedi Wizard, she thinks Santa can see whether she's being good or bad and she thinks Anakin Skywalker turned to the dark side only after her Uncle Andy stole Aunt Ashley's affections from him. -There's a small window in their lives where this stuff works, and it's actually a lot of fun for them. The key is, as they get older to teach them to think rationally. We don't have the Elf of the Shelf, but we'd not be opposed to having one. If it helps her to think about her actions and how they can effect an outcome, I'm cool with that.
I definitely agree on the over thinking. It all depends on if you want to guide your kids to the best decision making, or coerce them them through fear. Maybe not everyone sees it this way, but we can guide our kids to primarily look at decisions as opportunities to move toward positive results, or decisions as a crossroads in which they must avoid making terrible mistakes. The Elf can be such an opportunity for growth, but also a potential device of control. I recently read a book "No More Taking Away Recess and Other Problematic Discipline Practices" that captures the spirit of looking for growth minded discipline for children. I read it through the eyes of an educator and parent and have found some serious benefits. Cool stuff.