Excellent, I had thought of putting a pulley in a small box but leaving the front open so the mono wouldn't abrade on the PVC, (the tube I had imagined) I was going to mount it in the chin or chest though. When you put it in the back, the mono goes over the shoulder or through the body? I just can't imagine letting the nylon mono run over  the puppet repeatedly without a lot of wear. Am I being overly cautious,/paranoid?
I really appreciate the long answer but I'm missing something, can't quite visualize it... I't's probably a case of "keep it simple stupid," and I'm over thinking it.
Scoob

yeah, it really is a case of keeping it simple, mine generally go 'over the shoulder', even putting th monofilament just thru the fabric will be ok, because its not resting on the foam understructure, so there is no abrasion and 'sawing' when the monofilament moves, but it generally does not move alot (this also keeps the arms at the same level and the arms move via the natural swaying of the body) the little mech is mounted on the back of the neck (the bit before the fabric neck the comes out of the body) and not under the chin, so that the arms hang more naturally against the body (like bear) but ive got to be honest, its just a case of experimenting and finding what works best for you, the little spindle simply allows the stuffed arm to move up and down when the live hand moves, the tube/box is just a mounting place for the spindle and the small holes that i mentioned are just so that the monofilament is constantly inplace and does not come off the spindle for any reason, but this is not the only that this can be achieved, just have a play and youll soon realise what works and what doesnt. oh and as a side note, bears arms are attached to a sort of monofilament that simly goes over the shoulders and around the back of his neck, so even the really great looking puppets have simple answers!!!
i hope that its a bit clearer this time.
Ben.

sorry what is monofilament??

sorry what is monofilament??

Most often, monofilament refers to nylon fishing line.

yeah, sorry monofilament is fishing line, or 'catgut' as we we call it in england. its clear, strong and very smooth, but you can use almost anything that is relatively thin and strong to attach to the puppets arms!!

ok...
I used 1.5 cm thick foam.

Thanks Ben, I look forward to the chance to experiment a bit again...

billly has a great photo on how they do live hand puppets in his gallery its like how cookie monster is made also check out this you may have to search the pages a lil i tried to link directly to it but there a pic of how ernie is made/operated that i think may help you out cus it sounds like you want some thing like him hope this helps
http://entertainment.howstuffworks.com/muppet3.htm

I want to try in the future a rod-arm puppet. That web has a great ilustration about. I will have it in mind. Thanks for sharing!