I'll tell you what -- he'll sure as **** look nice next to Kermit, Animal and Gonzo.
I think he's a fairly safe bet (and maybe the best choice) for the first character, and I'd like to imagine Grover is next with the over-saturation of Elmo dolls out there; obviously I know this isn't a doll, but there is way more Elmo merch out there that could pass as a replica than all other characters combined.
When it comes to pipe dream figure lines, I'm more onboard with Beaker's mindset of it being a static-posed figurine line with minimal when necessary articulation. Something akin to Palisades Mini-Muppets in terms of size scaled an extra inch higher, since the Swedish Chef's hands come up to just behind the edge of the island counter in the Swedish Kitchen playset when it would be better if his hands were at least visible above that point of demarcation; and something akin to Tomy's Disney Magical Collection in terms of scope allowing for more characters from all stages of prominence to obscurity with a few sensible variants added here and there.
Yes, I'm definitely thinking of something more in tune of what Funko would produce than the obscene quality of Palisades; both are great companies, but you know what I mean -- something like Funko's Disney Afternoon figures (maybe a tad bigger).
btw, I can't believe you referenced Disney Magical Collection. You're literally maybe the first person I've ever heard mention those figures; I got a ton of them for Xmas one year in the early-2000s... criminally underrated.