From the sounds alone, I'd say it was a discotecque (Sp?) scene with a bunch of Muppets dancing and singing with a letter "D".
And Bushman Bill is the D.J. you're thinking about, Count. He's a lavendar live-hand AM with bushy black hair, moustache, and goatee. He wore a leopard-print shirt and gold chains. He had googly eyes (like Harvey Kneeslapper), a round green nose, a tongue, and a row of upper teeth.