1)Another added bonus of recording puppet shows is the relief of not having to memorize lines or follow a script very carefully. Instead of taping the entire script (a 10 minute puppet show will most likely have about 6 pages of lines, in my experience) to the page of the stage, I type up just the cues where characters enter or exit the stage and a few instances when they need to be performing a certain action as necessitated by the dialogue. For example, in The Tortoise & The Hare, the Hare trips over the Tortoise in the beginning scene. The cheat sheet tells the puppeteer exactly which line the puppets need to perform that action. We actually have two sets of cheat sheets backstage--one for each puppeteer. The actions they are responsible for are highlighted on each set.
2) Criteria I use for picking a script: 1) Is it entertaining and appropriate for our audience (toddlers--early elementary-school students). 2) Do we have the necessary puppets or are we only missing one or two? Are patterns included so we have the option of making the puppets or will we need to buy them. 3) Are props and backgrounds easily obtained/made?
3)A great way to find background music without the copyright problems associated with music released commercially is to look through sites associated with the Creative Commons project. Some artists will allow you to use their music for free (or will perhaps ask for a suggested donation via PayPal) in exchange for credit for using their music. One site I like is Incompetech. I definitely think using music between scenes or as an effect adds a lot to your puppet show. It is also quite easy to do in Audacity, the (FREE!) program I use to put together our puppet show recordings. Incidentally, if you are at all curious why someone would choose to give away quality audio content, Incompetech has really interesting answers to that and other frequently asked questions.
I hope that this and my previous post are helpful to you. If you have any questions, please feel free to leave a comment. You can also email me at firstname.lastname@example.org, or catch me on twitter.com/sotomorrow. Thanks for reading!