Well, if the English version is anything like the Spanish version I think I remember from my days of watching Plaza Sesamo...
Ernie's got the banana in his ear because he's trying to keep alligators away from Sesame Street. Bert then says that there aren't any alligators on Sesame Street. To which Ernie replies, "See how well it's working?"
The reason this one sticks in my mind so is because in the Spanish version Ernie said "banano" as the Spanish word for "banana", when the true Spanish word for banana is "guineo." Hope this helps,if I'm fright. Remember, this one's from deep within my memory so it might not be 100% accurate nor correct.