They had tried several things before this regarding spoofs/parodies including imitating Public Enemy, Baron Von Raschke, KISS, Lord Stevie, and Stevie Alexander Bagwell: https://en.wikipedia.org/wiki/Stevie_Richards

They weren't sure if the bWo spoof would work, but the crowd loved it right away - with no advance warning - as seen in the video. Later on their "commercials" on ECW TV made fans laugh even more, and this helped offer the "something for everyone" aspect of ECW at the time. Their humor helped offset the intensity and hardcore style as part of the bigger presentation for ECW.

Here is their funny "Christmas In New York" spoof where Stevie superkicked Santa Claus: