If that really is the case, then yeah, that I would take some issue with, because that is, arguably, misleading. Like in Grade 4, our teacher once gave us this extra credit homework assignment: write a recipe for a peanut butter cracker (as in a cracker with peanut butter spread on it, not a peanut butter-flavored cracker), seemed simple enough, so we did. You know who actually got the extra credit? Those who actually wrote down certain directions, such as to take the cracker out of its wrapper, or package, or whatever it came in (as the teacher pointed out, how can you spread peanut butter on the cracker if you don't take it out of its package), among other things... only a very small number of students actually wrote such steps, and were the ones who got the extra credit. It's a similar case here: they asked for originality, and specifically said not to immitate or impersonate any of the existing Muppet characters, but if that's what they were actually looking for, then again, that's misleading. I also find it a little hard to believe that they would simply select replacement puppeteers for certain characters from homemade audition videos, rather than pass them down to actual Muppet performers who may have spent the better part of the last 10 or maybe even 20 years right-handing, performing background characters and AMs and such.
But, we don't really know if that is at all true, or not, and at this point, I guess it's not our place to be concerned with it - we were rejected, and that's the end of the matter.