I use foam latex hands with my foam latex puppets. But depending on the size of the puppet and whether or not you are going to make a mold for the hands, the seamlines can be troublesome and ugly. I've also made foam latex characters without arms/hands and made them later with clay.
I don't know anything about your puppet, but Smooth-On has all kinds of different materials that you can try. I believe they sell sample-sized stuff so you can try and get you some of that!