How is bar width measured?
 

I have wide shoulders for my height and use 42cm bars, but I often find myself wanting to make my elbows touch each other, while in the hoods. Should I go for a 40cm or will it make the bike twitchy?

initial question: it depends on the brand, some measure center to center, some outside, etc.

only you know weather or not you should go to 40cm bars, no one here can make that assumption correctly.

twitchy? I don't follow. if it fits your body it shouldn't be an issue.

bottom line: figure it out through experience. ie:get some 40cm bars and try them out.

Maybe just get some aero bars? Seriously though that's not something I've ever had a problem with, I wonder if you should actually get wider bars.

Also, some bars are slightly wider in the drops than hoods. I know mine are.