*demolishes your writers block with conveniently placed TNT*

I can't answer your questions as I haven't read your novel, but there's one question I do have from reading what you've posted here...is Dr Medlock a human or another puppet/toy etc? I'm so sorry for asking what is possibly the dumbest question ever, but if it's the former then the biggest question on my mind is 'why is this dude stealing toys for research?'.

I don't know if you need to explain why the toys and such can come to life. Unless you're trying to write something that's totally grounded in the real world, then I think most people have a degree of 'okay, this is how things are in this fictional universe' in mind when they read something.