Everything looks normal. What appears to be happening?
It like when I talk in the mic, the puppet doesn't do those mouth shapes as expected.
Does the mouth move at all?
I've tried arming my mic and opening my mouth to say the "Aa" sound. The mouth does not move on the puppet even though I armed it in photoshop. It still has that smily face but no movement.
The mouth is sound based, not camera. Opening and closing your mouth won't create any activity.
Does lip sync work with the example puppets?
I've tried that but the mouth shapes doesn't get transferred from photoshop to character animator. Do I have to arm it somewhere in the character animator software...?
Some of the mouth shapes with multiple layers, like "Aa" and "Uh" in your example will need the cycle layer behavior to work properly. Since the mouth behaves like a swap set, only the default, neutral shape needs to be visible in the puppet.
In the Puppet panel, select the group that has the Cycle Layers behavior, then at the bottom of the Properties panel set the Cycle Layers Advance Every parameter to 2, 3, or 4 frames (default is 1).
I seem to can't get the visemes to show up at the properly to match with my voice
It looks like you have the Mouth Group tag applied to all your mouth shape groups. Try removing that tag from all the mouth shape groups and tagging only the "Mouth" group as Mouth Group.
Also, if you click that little triangle icon in the bottom left it will show you riggering warnings that might be helpful.