It's difficult to discern enough detail to determine what the fuzzy residue might be, though some species of aphid (woolly aphids) and leafhopper nymphs both produce protective fluffy white wax coatings over their bodies, some of which gets left behind on the plant as they move about. If you prod these tufts of fuzz, do they move or jump away, or does there appear to be an insect underneath? Do they rub off with a finger, or rinse off? If so, you can blast the leaf undersides with a strong jet of water to dislodge the residue.

There are naturally-occurring pathogens of insects that can cause fatal infections, though there may be other reasons for the insect "paralysis" you're seeing. Usually, fungal growth is evident from an infected insect's joints when they're dead, though the bee in the photo seems to be only coated in pollen grains. Some insects are simply are inactive in cooler morning or evening weather, while others play dead when disturbed by what they perceive as a predator. Some bees do just seem to "take a break" between foraging, especially if it's very hot out, so they might be sluggish then. In either case, no intervention is needed and you do not need to remove the peppers, nor is the wood chip mulch a problem.

Miri