re: proportions
Puppets do not generally conform to the proportions of anything. Most puppet bodies can wear child size 4-6x clothing (though some puppets are much smaller) but their heads are out of proportion (bigger). This is based on the theory that the head is where the audience should be looking and by being larger more attention is drawn to it.
As for hair, you might want to Google for some good web sites on wig-making. It's usually pretty time-intensive, but there may be a faster method than what you've tried!