I suppose it's because... while a great many jukebox shows are primarily based on the songs, with a flimsy FLIMSY plot stringing them all together, 'Priscilla' is based on probably the greatest Australian road movie about drag queens and a transexual ever. We already know the story and that the story is fantastic and not at all dumb.
But it's not like 'Desperately Seeking Susan', which was also based off an existing story but bizarrely used Blondie songs; it's wholly appropriate to the nature of 'Priscilla' to fill the show with camp '80s songs.
Of all the jukebox shows out there, I'd say 'Priscilla' is probably most akin to 'Jersey Boys', which I'm starting to think of as a play with songs. "Hello. We already have a story. We're going to tell it onstage. And we're going to add some songs; we didn't write them especially for the show, but they have been carefully chosen and are totally appropriate to the story we tell so will enhance the show rather than induce cringing".
Plus we're just all a wee bit camp over here, it seems.