The Ghost of Henson

Okay, so, you know, I'm sitting here watching Sesame Street (ahh fuck you it's what's on the noise-box at 7:30am) and there's this bit with some characters I'm too decrepit to know --specifically, a trio of Muppet faeries.

I wasn't paying attention to much of it, but apparently the sequence involved one of the faerie boys being temporarily made a prince. At the end, he's a bit disappointed not to be the prince anymore, but the teacher faerie offers him the assurance that he'll always be the faerie formerly known as Prince.

Am...am I reading this joke wrong? Did they just totally call Prince a fairy on Sesame Street?