Thanks for all the feedback guys on the puppet and I will definitely post more pictures as I have them. I don't have a sketch for the character as I am modeling the puppet after a real life person so I'm kind of doing it freeform. Look forward to showing you more as i make it.

Consider the Muppet, Animal. http://www.amazon.com/Corgi-DS155-Animal-Photo-Puppet/dp/B000RLDNJC/ref=sr_1_1?ie=UTF8&s=toys-and-games&qid=1249657966&sr=8-1.

Where do you think the hand for the puppet is? In the butt or the lower back or where?

In the case of the image that was linked to I think that is not a puppet but a toy replica of Animal.  The actual animal muppet would have had access via  the "butt" of the puppet.