The real question isn’t whether adding muppets improves this song. The question is why muppets make it insanely great.
Here’s my theory: contrast always works, and using muppets maximizes the contrast and irony.
This is why every other pop song by a diva has a guest rapper, the gruffer the better. And, shockingly, a lot of gruff rappers feature smooth singers to handle the chorus and even things out. It works both ways.
The muppet verions of classic rock songs never get old because you couldn’t find images that are less hard core and unthreatening. Nobody is afraid of muppets. Teletubbies, now, are trippy if not creepy.