Here is how I've envisioned the plot of the game.
It begins with Kermit finding out that this weeks special guest star is actually an evil alien who plans on taking over the world. The alien guest soon goes to his home planet, and Kermit needs to get help from the other Muppets.
Kermit realises that many Muppets are on vacation, and that he'll need to rent a boat. Scooter says that JP Grosse will finance the boat for the Muppets if Kermit (and others) complete a series of tasks. Once JP Grosse finances the boat, Scooter becomes a playable character.
At the Muppet Theater, Pops becomes a playable character once Kermit encounters him. In the canteen, The Swedish Chef is being attacked by the food, and Kermit must defeat the food in order to rescue him (and so that we can playa s the chef). Back in 2001 I hardly knew about Gladys, so I probably didn't think about putting her in the game. On-stage, Fozzie is gettign tomadoes and other rotten foods thrown at him by Statler and Waldorf, and Kermit must battle them and rescue Fozzie. Kermit can also make George the Janitor and Hilda into playable characters. And if you go to Miss Piggy's dressing room, Foo-Foo starts to attack Kermit, and once Kermit (or whoever) defeats Foo-Foo, Miss Piggy becoems playable (though she does karate chop Kermit). Lew zeland can also be unlocked here.
The Muppets also have to leave the theater to contact other characters. Fleet Scribbler and Marvin Suggs just hang out on the street. I'm pretty sure that Louis kazagger would have been a playable character, but I forget how he would have been unlocked. The Newsman would make news reports during the game. Kermit can go to a barnyard, where Gonzo and Rizzo are beign held prisioners by a group of evil chickens.
At the Muppet Boarding House, Kermit can unlock Rowlf, Sam the Eagle, some penguins, Bean Bunny, Crazy harry, Beauregard, and Thog into playable characters. Players can also go to the KMUP studio, to unlock Clifford, Bobo, Nigel the Director, Seymour, Pepe, Carl, Bill the Bubble Guy, and Spamela. Kermit goes to Johnny Fiamas dressing room, where Sal is overly protective of Johnny, and you must defeat Sal before they can become playable.
Muppet Central gets taken over by the Gorillia Television crew, and Digit, Waldo, and Leon must all be rescued. When you are granted a boat, Polly Lobster, Mad Monty, and Clueless Morgan are all on the same ship, and must be battled.
When you get to the other land, you find Dr. Teeth, whose bus has broken down, and the other Electric Mayhem members are elsewhere. Animal is running wild, Floyd is looking for bus parts, Janice has been kidnapped, Zoot is sleeping soemwhere, and Lips has his leg stuck in a bear trap. There is a cave, where Sweetums is vacationing at. There are evil bears who want to attack you before unlocking Sweetums. This cave also has a way to get to Fraggle Rock. There is a swamp, where Robin gets unlocked. There is a submarine soemwhere which the Mupets can use, but only Kermit and Robin can appear underwater without the submarine. And there is a nearby haunted house, where Bunsen and Beaker have been kidnapepd by Dr. Phil van Neuter. Other bosses besides Phil include Uncle Deadley, Doglion, and Mulch. The frackles also appear as enemies, as do evil clones of Beaker.
After all that, the Muppets can go to a space station, where Link and Dr. Strangepork are unlockable at. But the player has to give up most characters, as the ship can only carry 8 people. Kermit and Miss Piggy can't get out of it, and neither can Link or Dr. Strangepork, so that leaves four playable characters to choose from. The spaceship goes to the planet Koozebane, where several koozebanian creatures make cameos, as do Gonzo's alien family and the Muppets from Saturday Night Live. Eventually, the guest star appears and must be defeated.