Either way, you lose 25% of your picture... it just depends on which 25% you'd rather lose: possibly the tops of performers' heads and the "sleeves" below the Muppet torsos, or random people standing off to the side, staring into space.
Muppet movies are the only movies I know where you actually gain more picture in widescreen than you do full screen... everyone says you ALWAYS lose 25% of the picture in full screen, but that's not always true: most movies I've seen actually have MORE picture in full screen than widescreen, in widescreen, you either lose the tops of people's heads, or maybe their ankles and feet in crowd shots and such... but with Muppet movies, you actually do retain all of that stuff, plus extra... I was even surprised at how much we gained with the recent anniversary edition of FTB,compared to previous VHS and DVD releases that were in full screen.
My opinion? Widescreen for Muppet movies, and Muppet movies ONLY; full screen for all other movies if at all possible.