Trying to remember a movie that I saw some time ago... Its puppeted, hailing from NZ I think... Peter Jackson early film?? Quite sick, really... (Hello Renee, its Peter Jackson, of course its from New Zealand, duh)

Meet the Feebles (http://www.imdb.com/title/tt0097858/) from 1989.

Thank you so much, that's it! Definitely worth a look, if you have a strong stomach...