I don't think either of these designs are bad really, the SML puppets are ugly, sure, but in a way that fits SML's edgy PI content - New SMG4 is actually kinda cute, and certainly a lot better than Meggy, the melon girl, or the axolotl looks. I feel that if you tried to remove as much of the Mario influence as possible (SMG4's outfit and "Marvin"'s red and blue colour scheme) they'd stand on their own as decent designs.