I guess I'm somewhere in the middle on this. I love the look of Muppet Treasure Island and Muppet Christmas Carol, but seeing Muppets in the real world is very exciting, too. I like it that The Muppet Show dropped humans into a world overrun by Muppets, and then they reversed that in The Muppet Movie by putting Kermit in with just humans, and the occasional Muppet to run into.
Personally, I'd like to see them mix it a bit more. Sort of like with Greg the Bunny. I'd like to see the Muppets in the real world, but both humans and puppets as background characters... I don't know if that would quite work as well with the Muppets outside of the "storybook" setting, though.