One of the interesting things I've discovered while discussing some of the concepts I am working on with Panda Puppet is that the idea of digital puppetry or utilizing puppetry techniques in animation seems to get a much warmer reception from most animators than motion capture, which has been the subject of fierce discussion and debate lately. Personally, I think the fuss over motion capture has been much ado about nothing and there are lots of ways that all these different techniques can co-exist and be used in tandem with another.
As an example, animator Michael Duffy read about Panda Puppet over at Keith Lango's blog on the weekend and pointed me to Timothy Albee's Facial Animation, a plug-in for Lightwave that allows animators to do lip sync in real-time and includes a somewhat limited 'puppeteering' mode. I don't know how useful it would be for real-time performances, but it's interesting to see another example of someone blurring the lines between puppetry and animation. You can read more about the software here. A free demo can be found at the link above along with some videos showing it in action.