I really like Most Wanted, but in order for that premise to work the audience has to buy that none of the Muppets (except Animal & Walter) suspect anything wrong with Kermit. So it did make them much more oblivious than they have been in the past.
Exactly! The Muppets, except for Kermit, Animal, and Walter, are turned into hive-minded morons for the sole purpose of doing that stupid "CHARACTER A steals CHARACTER B's identity and despite how obvious it is that it's not CHARACTER B everyone falls for it because they're suddenly idiots" cliche. I wouldn't be surprised if the majority of people decided not to see the film as soon as they found out the movie was about that cliche (although being up against
Divergent clearly didn't help either).
I don't think it is solely to blame for the current state of the franchise.
It kind of is. It scared Disney away from doing more theatrical Muppet movies, and instead of basically being a new
Muppet Show the ABC series (which I did like in spite of its flaws) was very clearly made the way it was to cash in on the success of other "mockumentary" shows like
Modern Family and
Parks and Recreation. People misunderstood the show (which we were honestly lucky to get at all), assumed that it was going to be a televised
Avenue Q with actual Muppet characters, and didn't watch it, resulting in it getting cancelled. Then they pinned the blame on Steve Whitmire and had him blacklisted, and then it's been a series of ups and downs.
The live shows were great, and then we got the phenomenally lousy
Muppets Now. Then we got
Muppets Haunted Mansion, which was good. Then we got nothing. Then we got the Electric Mayhem show, which was great when it was focusing on the Electric Mayhem but spent way too much time on the boring human characters. But despite how much everyone loved the show, Disney canned it after one season and now we have... nothing! I don't think a single new Muppets production has been announced since.