Zoe is such a great looking puppet. Not the most complex character ever to appear on Sesame Street, but she really does have a unique style that you just didn't see prior to the 90's. I mean, for the longest time, any additional monsters would have been made up of AM's covered in fur. Her design is just wonderful and her eyes, when properly proportioned to her head make her look very expressive. With Homunculus Zoe, however, the proportions are all wrong, and her hair throws it even further out of whack. She looks like a cheaply made plush doll version of herself, and I really think it takes away from the character's overall visual appeal.
But make no mistake... they used her only because they would need to have built another Zoe anyway (she gets a lot of play, and her puppet would wear out... plus, they always need at least one back up), and using a shrunken Zoe that was only that small because it was a puppet of Zoe as something else was the cheaper alternative than to build another and just toss the alternate sized one aside.
I think they should have made THAT the back up.