Back before I knew what Poppy Playtime was, my first exposure to Huggy Wuggy was through Tankman's profile picture at the time. And back then, his design, more specifically that picture, actually kinda creeped me out, the contrast between this weird plush thing with a scary set of chompers just gave me the heebie jeebies. I feel like something that helped it was that he was standing in a brightly lit room with a vibrant blue wall instead of the dark and gloomy factory of the actual game, which I think added to the creep factor by playing up the contrast. Though I think that another big part of why I was so creeped out was because of the questions it raised. "Who is this weird plush monster?" "Why do they have that weird set of teeth?" "Where are they and why are they there?" And now that I know what he's from and all that, all of that creep factor just kinda vanished.
Also at first I thought that it was from the cover of a Goosebumps book. It just had that vibe.