Method

Create a box to keep the letters in.
At circle time you can get the puppet to pull out a letter.
You can either use the puppet to introduce a single letter such as "letter of the week" (in which case only place the relevant letter in the box) or to introduce a number of letters.
As the letters have a Velcro like attachment they will stick easily to the puppet's hand and it will appear as if the puppet is holding the letter.
Now the puppet can ask what letter they are hold, and develop it from there depending on the level of the children. For example can they think of words that begin with this letter? or by using picture cards or letter cards can they match the card with the letter the puppet has?
The letters and numbers can also be used on felt boards.