Fears were raised that Lydon would walk off the show, which is due to begin on ITV tonight, after being "surly and uncooperative" since arriving in Australia.
He has refused to speak to the reporters at a photoshoot for the 10 contestants, and is also reported to have threatened to walk out of the jungle after clashing with a cameraman.
Lydon, whose band The Sex Pistols launched punk rock on the world, has come in for a barrage of criticism since agreeing to go on the show and has been accused of casting off any last vestige of his former punk spirit as he is forced to go through a set of humiliating challenges before being voted off by the public.
Mallet, viewed by many as one of television's most annoying personalities, now runs his own production company producing children's television programmes and could not be further removed from Lyndon.
Casting Mallet as a replacement would be a bizarre move for Granada, the production company behind 'I'm a Celebrity... Get Me Out of Here'.
"I'm used to being a replacement and I'll make the most of it," Mallet said. "I was Roland Rat's replacement on TVam so taking over from a celebrity in the jungle will be no problem after that animal."
This morning ITV denied rumours that Lydon was about to quit the show. The 10 contestants in the ITV reality show do not know that Mallet is waiting in the wings.
"I expect I'll sit around the pool at the hotel, drinking pina coladas and chilling out, while they enjoy the wildlife crawling over them and some delicious bush tucker. Still I'll be ready and willing for anything when someone drops out," Mallet said.
ITV has denied that Lyndon has left or is planning to walk out. "He has definitely not quit. He is making preparations to join the rest of the contestants in the jungle," a spokeswoman for Granada said.
Bookmakers William Hill cut the odds on Lydon being chucked off the show for bad behaviour from 8-1 to 5-1.
Despite his testy behaviour Lydon is second favourite at 4-1 to win the show, behind soccer former Liverpool and Spurs football Neil "Razor" Ruddock at 11-4. Jordan is rated at 4-9 to go topless first.
The two previous series on ITV were both won by men with former Radio 1 DJ Tony Blackburn and former cricketer Phil Tufnell having being crowned King of the Jungle in the first and second seasons respectively.
The other contestants this year are: former BBC royal reporter Jennie Bond; Alex Best; former pop stars Peter Andre and Kerry McFadden; shamed aristocrat Lord Brocket; former Olympic athlete Diane Modahl; and DJ Mike Read.
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