I think he talked about why he wasn't on the show when he was on The MuppetCast a few years ago for a Jim Henson tribute show. I can't remember all the details, but it wasn't because of directing (at the time the show premiered his only directing credits were for the "Number Three Ball Film" on Sesame Street and co-directing "The Dark Crystal", both of which Oz said in interviews that he didn't really consider to be directing jobs for him). Oz wouldn't start directing non-Hensoon films until 1985.
But in the 1980s Henson seemed to start seperating his performers for different productions, because Henson started to do a lot more in the 1980s and it would hav ebeen hard to have all of the same performers perform in every production.