With some light plywood, hinges and curtains, it is possible to create your own puppet stage. Keep the children at a safe distance when using power tools to make the cuts and sand all of the rough edges so no one gets hurt carrying the stage or brushing up against it. When it is done, it will have a large rectangle cut in the middle for the performance, and a wing on each side to hold it up. It will fold up so it can be easily stored away, and it would even be small enough to travel in a mini-van on weekend family trips to do a show for the relatives. Make sure it is just the right height for the children and also be sure there is plenty of room in the backstage area for the children to move around as they put on their shows. You may even want to include hooks and storage bins for costume and puppet storage as well.
Allow the children to decorate their puppet stage however they want. If they ask to use paint, be sure to put plastic down and monitor the children as they use the paint. Encourage the children to create scenes on their puppet show stage that they may be acting out with their puppets. If the children envision dragon stories, then encourage them to draw dragons and knights on their puppet stage. Make the entire process as creative and fun as possible so the children get the most out of it.
Children may want to see their audience when they are putting on a puppet show, so you may decide to add a little high tech surveillance to the puppet stage. Install a small security camera on the puppet show stage that will allow the children to see their audience. When the children are performing, set up a computer monitor that will access the camera and allow the children to react in real time to what their audience is doing.