Hmmm... what if you found a medium-sized stuffed caterpillar doll... and wore a black glove in stark contrast to the color of the caterpillar... and sort of invisibly strapped the catty to your hand... that might work... sort of a Japanese-like puppet... or even use sticks, the way Sesame Street does for Slimy Worm and his buddies....

Or get a much larger caterpillar doll... cut it open and make it so that your hand can fit inside... get little doll glasses for the eyes... .

Or take a really, really big sock... stuff rolled up socks in its "back" to make the inchworm humps, and tack them in place with a couple of stitches... and I'm sure you know how to handle the rest of the sock puppet....

Even if the thing looks like a snake on stage, if you over-stuff some of the spots on its back to make body segments or back humps, and you keep insisting over and over again that it's a bookworm, this could help as well. It's awfully hard to distinguish a caterpillar from a worm from a snake at a distance anyway, so don't be too hard on yourself.

Hope this is helpful... good luck, and please let us know how it turned out....
Bright Blessings,
Lil