That is actually a pretty clever solution for someone who wasn't a production guy in the strict sense. Dick Cavett was a television personality, a comedian and a magician, but not a filmmaker. And you can see how that scene would have proved tricky. The people controlling the monster hands couldn't see the faces of the actors they were aiming for, so I imagine this led to quite a few unpleasant eye pokes and ruined takes. Nowadays the shrimp hands would probably be completely CG, or there would be a quick digital fix for this issue. But practical solutions were needed for production problems such as this, and they often required some outside the box thinking like Dick Cavett proposed.