I decided a puppet theater would be great. After scouring the internet and seeing how expensive the very thought of this was, I decided that I would need to make it in order to stay in budget. I found a few "puppet theaters" that were curtains to hang from nails or rods. So, with a lot of help from my mom, I made my own puppet theater curtain.
Lydia loved the present and won't let me take it down even for a moment.
Here are some photos of the process: