Perhaps a better title could be "The Greatest Muppet Video Game Ever! (So Far)". And to add some irony, maybe the first few levels could be really lame on purpose. aybe have one or two levels with 1970s-style videogame graphics and no moving screen (perhaps a character can be in a maze for one level, and in another a character would play a game, like checkers or table tennis, against another character), and then a few levels with 1980s-style graphics and a scroll screen (perhaps, like in Super Mario bros., it could be impossible to move the screen backwards). And then it would get to a much greater plot with comtemporary video game graphics.
Another idea, though not for "trhe greatets...", would be a Muppets Arcade game, in which Bunsen brings a number of classic arcade games to the theater as part of an experiment, whichc auses the Muppets to get trapped inside arcade games. This could lead to a variety of parodies... Though I wodner if the parodies should be made really comical, or if they should just be remakes with Muppet characters replacing the original main characters (much like many of the parodies on Family Guy). My Donkey Kong idea could work for this, though I think I'd rather have Kermit and Piggy in seperate games. Maybe Kermit i n a frogger-like game, and Piggy in a beat 'em up game similar to the Teenage Mutant Ninja Turtles and Simpsons arcade games.
And then either Gonzo or Scooter can star in a paperboy-like game, Bunsen and Beaker can compete in a video boxing game, Animal can be in his own Pac-Man parody, and it'd be great if Fozzie and Rowlf can get opportunties to play in games. Maybe you could unlock a rerelease of the Pigs in Space game, and the unreleased Miss Piggy's Wedding game.