Make some puppets:
There are no rules and regulations when it comes to making puppets, so have fun and be creative! You and your puppeteers can discuss which kinds of puppets to make -- paper cutouts, sock puppets, finger puppets, etc. Look around your house for materials so you can cut down costs -- for example, an old blue scarf makes a great Nile river, or an old tissue box can be cut into triangles and then painted to make an Egyptian pyramid. Incorporate music or songs into the show, and show your kids how to play around with their voices to sound more like their characters. Remember -- anything goes!
Let the kids do most of the work:
The more you involve children in the process of putting together the puppet show, the more excited they'll become and the more they'll learn. You may want to delegate jobs by age, giving older kids the chance to write some of the dialogue and younger kids a chance to help make the puppets. Just make sure to engage the kids as you create -- for example, if you're writing the script, ask things like, "if you were Moses and you had to talk to Pharoah, what would you say?" or if you're making puppets, ask things like, "if you were living in the desert, what would you wear?". Questions like these will help children relate to the characters and give them a more personal understanding of the ancient story.
Include some Passover snacks:
While the children are busy making their puppets, why not take the opportunity to teach them more about Passover by giving them some special Passover foods to snack on? You can make sandwiches out of matzoh (large, flat crackers, eaten instead of bread during Passover) or make some haroset (a mixture of apples, raisins, wine/juice and nuts, made to symbolize the mortar the Jews used as slaves) for them to munch on. This is a great way to teach kids about why Jews eat special foods during the Passover holiday.