.. Getting the rubber band off

Mr. Fumble, of course. You just need to get him to Sgt. Crabulous.

Well, he can't swim. But there's that rope he could climb when the tide is low.

Help Kermit the Hermit and it will leave. show spoiler Helped Kermit

Mr. Fumble can now climb the rope.

Walk Lucy back to the pier. Enter the dream with the duck and water. Ride Lucy to the other side. Swap Mr. Fumble back. You should now be both at the Sergeant's.

Mr. Fumble will help remove the rubber band.