Judging from the photo of the show, I think it would actually be more magic breaking if the Fairies did have the rubberheads. It makes more sense and looks better in my eyes for all characters to be either all 'real' or all 'plastic', it would be odd to see Aurora talking and expressing, and then the Fairies not moving their mouths at all, at least this way it flows nicely.
I do have an issue with Genie as you also brought up, because he just doesn't look right for me, he was designed for a stage show and fitted with that theme, but didn't in his Paris version.
As for the show, for me, the magic is that the characters are there in front of people, and that the castle is lit up in a magical way. The atmosphere of these shows is what makes it for me, and as an adult the Rubberheads would ruin it, the extra reality seeing a face would bring would make the show seem more professional for me.
Let's face it, most kids who go to Disney have most likely got no idea who they are in the first place, sure they'll know Mickey, Stitch, Beast and the other more recently characters, but throw some of the original classics at them and I doubt they'd know anyone other than the princesses.