Seems like it was shot earlier in the series, everything is pristine.
There is a parade or festival.
Kids are blowing up balloons. Not all all the puppet cast are there though.
They are makings masks with feathers, the masks don’t fit their faces properly. The preparation doesn’t go well.
The animals march into the forest with an inflatable caterpillar which looked like a maggot.
They sing a marching song as they go into the woods. The town was empty at the end, but the carousel is still moving, going faster and slower according to no reason.
The final scene sees a puppet hand rising from the earth.