Why was it such a misfit?

Is it indeed the nuttiest Nutcracker? All I know is it wasn't nutty enough.

And that's a pity, because the first part of it showed some potential. The special plays the Nutcracker story by the book up to the point where the Rat King appears. He's introduced via song and dance as an egomaniac named Reginald who commands a rat batallion and uses it to enslave walking, talking produce in his cheese mines. He's come for the food left over from the party!

But the food won't have any of it! The next few minutes are insane chaos, as the rats are assaulted by overweight oranges, vicious cauliflower, a Rastafarian potato voiced by Cheech Marin, and so on and so forth. Eventually the Nutcracker comes to life and ends it with a one-on-one sword duel against Reginald, until the girl (Marie) wakes up and finds out not only that her nutcracker can talk, but so can everything else.

As for where the special goes from there....Picture #5 to the left sums up my opinion on it. It's still full of talking vegetables, but the crazy liberties are taken no more. It's a straight story from here until it ends, and it's aimed at girls. Marie falls in love with her nutcracker, and they escape to a fantasy world to stop the Rat King from possessing the star on top of Marie's tree. As is not explained (but you get the basic idea), whoever holds the star controls Christmas, and if the star were ever destroyed, Christmas would be as well.

The kind of audience that would come for that story probably wouldn't appreciate the farting beans, so it leaves The Nuttiest Nutcracker as a special without appeal.

Why didn't it fit in?
The Nuttiest Nutcracker was originally made as a direct-to-video movie. It was released as such, but aired as a special at the same time. Bad animation, as far as Christmas specials go, seems to age them better. People love seeing the imperfections of 60's yuletide films. But it's not the same with computer animation--this didn't look very polished then, and it looks even worse now.