I spoke with HIT Consumer Services, and they have some details:
Episodes are "Boober's Dream," "Wembley's Egg," and "Red's Blue Dragon."
Bonus features include Fraggle Challenge, which should unlock a fourth bonus episode. Not sure of other bonus features, but at least one animated episode should be included.
Still no word (yet) of a Season Two box set. The first two episodes on this single-disc, however, are early S2 shows. Not sure if that means anything...