Hmm interesting.
I must say I agree if the puppeteer is good at their job, then having them visable is just fine and in some ways enhances the performance, allowing one to appreciate just how good they are at their job, such that one doesn't really notice them. Likewise if they are good at it then one isn't going to notice too much what they wear. (I recall once seeing Louise Gold do a cabaret performance, that included some puppetry, in a purple evening dress,
http://www.qsulis.demon.co.uk/Websi..._Gold_By_Appointment_Short_Version_Review.htm ).
I have also seen Nigel Plaskitt, puppeteer live, and I have no recollection of what he was wearing, although I don't think he was all in black, but it's a testomoney to how good his puppetry is that one just wouldn't be bothered (
http://www.qsulis.demon.co.uk/Website_Louise_Gold/James_Church_Presents_Cabaret_Night_Review.htm )
But sometimes when watching relatively inexperienced performers, including some of the Avenue Q people (other than the original B'way of course), seeing the puppeteers can be a little distracting (
http://www.qsulis.demon.co.uk/Reviews/Avenue_Q_Review_2.htm ), but it is the tradition of that musical that one sees them. I think in that situation it is right that they should be dressed in traditional black.
One highly unusual late night benefit I saw last Autumn, from 'The Company Of Mary Poppins' also involved a puppet giving an introduction, they started off with the puppeteer more or less hidden from view (well we could see the puppeteer's knees pocking out from behind a board), but soon had the puppeteer visable, and I don't think it mattered, mainly because the puppeteer (actually one of the members of their company) was rather good at at. And yes the puppeteer was dressed in black, but one felt that could've been as much about wearing something smart and comfortable as about tradition, who knows. (
http://www.qsulis.demon.co.uk/Website_Louise_Gold/The_Company_Of_Mary_Poppins_Review.htm ).
I also think, if you have visable puppeteers, it can help if the puppeteers try and focus their own eyes in an appropriate position where it won't provide distraction. (ie either they should look at their puppet, or down at the floor, but not straight at the audience).
Just a thought.