The characters were designed by the Henson company on contract to Children's Television Workshop, and were operated by Muppeteers; most notable is Grover being voiced by Frank Oz. While the business end of things is a bit murky (in terms of character rights and so on - when Kermit appeared on the show he was as a 'special guest star' and hasn't been on a segment for quite some time), the Sesame Street characters are, for all intents and purposes, Muppets.
I'd never heard of this guy. 'Despite significant popularity, he was dropped from the cast following letters complaining of a negative African-American stereotype, and because his rowdy elementary school did not set a good example for children.'
This thing makes sense, though. I remember liking sesame street because it was apparently set in the ghetto. Like, Oscar the Grouch is basically a bum, for instance. That they at one point had a segment with an elementary school comprised of mostly African-American children seems like the missing piece of the puzzle.
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