Not sure when this episode actually aired, but I know the show ran from '76-81, so it was more than likely when "Rhoda" was still on the air and Harper was at the height of her popularity.
I've long thought you could tell a lot about a celebrity from how well they interact with the Muppets. It takes someone who doesn't take themselves too seriously and is willing to have a little fun with their image, and do things they didn't normally do (like sing and dance).
Most of the shows I recall featured celebs who meshed really well with all of our "felt" friends.