There definitely is a place for paranormal romance, after all, a huge chunk of the populations wants that romance--it's the feel good warmth it can exude that draws most fans--that happily ever after that appeals to all of us fairy tale lovers (and I am no exception there). And, I want to make sure I emphasize that not all of them are the same. Those gems in between sameness are the ones we usually cling to.
I think the problem that I, personally, have, is that many of the series don't focus so much on the story, but on an exceedingly limited formulaic process, particularly in paranormal romances where there is always a "true mate." Character A meet character B. They are destined for one another. They have a lot of sex (which if most of us are honest, it's the only thing we're flipping through the books for
) there's a big conflict because Character B's life is going to be irrevocably changed, then happily ever after after when Character B accepts said change. Rinse and repeat with different characters.
Is this all there is to paranormal romance? Of course not. Is this what the market is flooded with? Yes.
And then we can twist back to the impact on urban fantasy as well. Sex sells. Hence, we get Laurell K. Hamilton's Anita Blake books. Anita's as vanilla as you get through (if I remember right) the first five books. Then bam, the books suddenly open up with menages, which immediately divides fans into the old and the new. This series has probably one of the most violent reactions not because there's suddenly lots of sex, but because the character change is too rapid and trying to fit a growing market.
Okay, so now I'm swinging back around again--I think it's pretty much a cyclical pattern, as are most things in life, but paranormal romance impacts urban fantasy, and vice versa, but the authors we love the most tend to be the ones that buck the trends.