Your eyes know when something doesn't belong. In a produced film, subjects are backlit and spotlighted to put them to the forefront of a scene. If you take a film where reality and grit are important, you want the subject to blend in with your surrounding. You want the eye to follow its natural paths and to believe the scene just happened. CGI creates an automatic contrast, draws focus from the real stuff, and requires an extreme amount of work as far as lighting goes to be even close to convincing. Puppets are real, and you don't have any of those problems. Furthermore, you can give a puppet real glass eyes that reflect the actor's face. Look at the work Spiral has done, or the Aliens series. A good puppet creates a stunning, real experience. CGI can currently remove the limitations puppets have, but they're a poor replacement.
I'm sure CGI will eventually make leaps and bounds past puppetry, and as far as solids like the transformers or the space battles go, it's gone way past many of our miniatures.
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