Age of Distinction for me. While I have love all for of G1 (and own all of the US G1 toys), there's a distinct "next level" reached by the Diaclone/Microman toys and their associated first two seasons of the cartoon.

Much of season 3 of the cartoon wasn't up to the same standard (not so much animation although there is that, but how well the characters were presented), and most of the better characterisations were of "Golden Age" bots such as Blitzwing in FFOD or First Aid & Swindle in The Ultimate Weapon. Rebirth was a giant toy add that barely stopped to tell a story.

The other factor after the Age of Distinction was that many of the alt modes really stopped being robots in DISGUISE. While Hot Rod's vehicle mode looks good... it's clearly not an Earth vehicle. Meanwhile Splashdown turns into a... thingo. It wasn't until the Micromasters in 89/90 that proper earth disguises came back in a big way.