Beauregard chose answer #1.
The Muppets while crossing the bridge had covered their eyes in order to keep the buzzards and bats from poking them out. Without knowing where they were exactly going, or seeing where they were going, their huddle is stopped short as they bumped into something, and it is followed by a booming, deep voice. Peeking out, they find the buzzards and bats have become hair on the head of a Giant.
YOU THERE! WHAT BUSINESS HAVE YOU IN CROSSING THIS BRIDGE?!