In the kitchen with the 'new' Lamb Chop, one camera angle shows the character with 'hair' over her eyes. The next angle shows 'hair' far back on the head.
After Lamb Chop backs out, Fran tells Mr. Sheffield he'll have to get Miss Piggy for his project. This is an idle threat, as the purchased film rights are for "Lamb Chop: The Movie".
When C.C. arrives in her lambswool coat, Lamb Chop screams hysterically, while Fran ominously suggests it could have come from one of Lamb Chop's relatives. However, unlike fur, wool is sheared from live sheep who are not harmed by what amounts to a haircut. There would be no reason to become hysterical on seeing the results.