Yup, in many cases scanty clothing highlights nakedness more than simple nakedness does, with humans as well as Fraggles.

As for the clothing conventions, as they're already a fur-bearing species, I think clothing for Fraggles is whatever they're comfortable with, Gobo wears more clothing than most, Boober only wears a hat and a scarf.

There's nothing to say that all the band are Fraggles, and a lot to suggest that at least some of them are not. (The drummer seems to be a a cross between Red and Animal, and the one in jeans doesn't have a Fraggle... not sure what the word would be... snout?)