Yeah i am also more of the persuasion that if they were going to relaunch something for pre-school then Fraggle would have had the best chance of a 'hit' but then i also think they would have had to remake Fraggle completely, as even todays puppet shows are so different in style. If kids aren't used to a style, they won't watch. Remaking Fraggle would have cost so much, they would have probably still had the whole stigma of it being nostalgia (not sure if nostalgic stuff really does work on a pre-school level too - not seen any real examples of that) and i'm sure us guys wouldn't have liked it. Then you got Muppet Babies, unless they are remaking the show, it'll still look a bit different to usual kids fodder but re-running an old show isn't going to cost and it has the added bonus of getting kids interested in the Muppet characters so i can see why they made the choice (if it was them that made it) given their current situation.
I think personally they should leave the nostalgia to the adults and just come up with some new original pre-school ideas. Hoobs was a brilliant example of a good pre-school puppet show for todays youth, and i think was inspired a lot by Fraggle anyway. Using elements of the old shows rather than re-making them seems to work better. Moppatop and Construction Site both show what Henson can still do very well in the kids market - could it be that the USA side of Henson are lacking ideas and creativity while the UK side has been really buzzing up until very recently ? In the U.S they haven't had a hit since 'Bear' and have gone way too far down the road of thinking 'Education First, Fun Second' by doing 'Animal Jam' and it's just not what the kids want.