Maybe the reason Jyggalag doesn't appear in Skyrim and Sheogorath still looks like the same old Sheogorath is because Sheogorath never left. Jyggalag just changed back. The Hero of Kvatch only thought he or she was the new Madgod because he or she had gone insane. Those references to the life of the Hero of Kvatch weren't admissions of being said person, but rather recolections of his hand in the insanity of the Hero.