<sigh>
Oy. Pepe, Pepe, Pepe.
Here's the deal as I see it:
Pepe is a good character. He adds the adult edge, and is a nice contrast to some of the other main characters, for example, Fozzie comes to mind. Pepe is crazy about women and all the material things, whereas Fozzie is, well, a giant teddy bear. And not just because he's a bear. I mean, all he wants is to be accepted, really. He just wants people to laugh at his jokes.
But Pepe is overused. Insanely overused. It's not so much that I don't like him, I just don't like when it's JUST him. I wouldn't mind him at all if the other characters created that contrast instead of fading into the background.
But I don't think that will really happen as much as I would like. Brian Henson says it very well in the "Tale of the Story Beyond the Tail", an extra feature on the MTI dvd. He says that muppet performers become star performers because they do whatever they can to upstage each other. And that's really what Pepe does- upstage. And that's encouraged in the muppet environment.
Trouble being that the muppeteers don't seem to see that certain characters just... have a limit. Pepe is one of them. Elmo is another. Both good characters, but they need to share the spotlight.
Well that's my opinion anyway.