Yes, those are finger puppets! I usually use them off-camera, as they can help the child relax.
My downtown studio has huge windows, one reason I chose it. As they are here and in the ones I put up yesterday, whenever possible, I use natural light. I love the look and enjoy working in the environment. I also believe it is easier on client, however old they are. The professional models I work with are comfortable with bright lights and flashes, but most people seem to find it easier to relax and be natural without them.