What an intriguing question. All I can remember from growing up in the
80s are the Cabbage Patch Kids (I never had one, but it sure seemed
like everyone else in the world did) and the Care Bears. However, I
did some searching and I think I found the doll you are looking for.
The dolls were called Hugga Bunch (or Hug-a-Bunch). According to the
following description of the Hugga Bunch movie from a reviewer at
Epinions.com you remembered it very well - I'm impressed!
"The girl then hears noises coming from her bedroom closet mirror, and
these adorable Huggabunches puppets come out of her closet. They
decide to help the girl, and take her to HugginLand, where the puppets
live. The puppets believe that the only way to prevent her grandma
from leaving home is to make her young again. After singing some cute
songs that are catchy for younger kids, they go and talk to the all
knowing all seing bookworm. Yes, thats a worm puppet, in a field of
big, larger than life books. The worm says that the girl must go to
the evil witch's castle and take some of the special tomato like
fruits back to her grandma - that is what has kept the witch so young
--but don't let them touch the floor, or the fruits will disappear..."
More info on the Hugga Bunch movie from EOnline:
You'll find the Hug-a-Bunch doll listed on this neat list of 80s toys
(talk about taking me back):
From what I could find, the dolls were designed by Lloyd Middleton in
the early 80s, and were manufactured by Kenner Toys of Cincinatti, OH
There is a good bit of Hugga Bunch stuff for sale on eBay
Search Terms Used
movie huggable witch mirror
"hug a bunch"
Hope this information helps to take you back!