Did you miss the part about the higher stakes at 11:30 making the networks more risk-averse? What works for crime shows and local newscasts doesn't translate to what will work for a comedy talk show, they're different beasts.
The tame jokes on the Tonight Show were producing flat ratings and shows that no one cared about. In addition, the Jay Show at 10pm (last I checked, it was a comedy talk show
) was taking all of the good prime guests away from Conan's show.
When Conan found out he was for sure getting fired, he turned up the heat and started killing it with hard hitting jokes. On top of that, he was getting some of the best A-list celebrities ever. The ratings for Conan's final two weeks on the Tonight Show were higher than they had seen in years.