Well, I think this project is awesome for a number of reasons.
1. It probably secures us at least a Season 2 and maybe 3 DVD release. With an upcoming movie I'm sure that Hit will want to profit from it.
2. New fraggle film time!
3. New Fraggle STUFF!
I don't think that the sexuality thing will really be an issue. The muppets ALWAYS made sort of dirty jokes (you have seen the muppet show, right?) They weren't very strong dirty jokes, but for the 70s and 80s and for the fact that they were puppets they were still vaguely adult.
It's hard to gauge how far is too far today. I think that the muppet writers are trying to push the envelope about as far as they used to, but really how far is that in the day of Sex and the City anyway? (not that I don't like the show, cause I do, but it's a fair example of what people are willing to put up with so long as there are good stories too.)
The Fraggles never really did that. The Fraggles didn't have dirty jokes to begin with. They did "push the envelope" in other ways, like using big words and openly discussing death, disease, and some philosophical issues.
Providing this isn't just one big Uncle Matt extravaganza, I'll probably be happy. Even as a kid I wasn't really amused by his misunderstanding of the "silly creature" world when in other Fraggle songs they used "human being" and other human words quite liberally.
In any case, getting new kids to start watching Fraggle Rock is good. I don't think there's ever been a show made quite like it.