Randy: Who do you think would win in a fight, Muppets or Sesame Street?
Earl: I don't really think they'd fight, they're both pretty peaceful.
Randy: What if they had to? Like in that head-choppin'-off-movie, where there could be only one.
Randy: Ok, what about Muppets or Fraggles?
Randy: Ok, what about Muppets or He-Man?
Earl: Just He-Man or He-Man and his friends?
Randy: Just He-Man.
Lots of Jim Henson references here: The Muppets are puppets created by Jim Henson. Sesame Street is an educational children's show with puppets created by Jim Henson as well. The Fraggles are the stars of Fraggle Rock, also created by Jim Henson.
He-Man is a cartoon figure from the series He-Man and the Masters of the Universe, which was created after a toy series.
The "head-choppin'-off-movie, where there could be only one" is the Russell Mulcahy movie Highlander with its uncountable spin offs and sequels, featuring a number of immortals battling each other in one on one sword combat, for their only means of death is decapitation.