Based on the image you've used, I'd probably try using two motors to turn the two different sides. Definitely see if you can score a couple of reindeer motors (just because they may be easier to find in thrift stores since it's so soon after x-mas) or a wiper motor.
It looks like each side has a sort of bike pedal setup - that's what I'd likely attempt to build out of pvc (or better if you're handy).
I can see using a piece of stretchy fabric (length of something with a bit of spandex in it, sewn into a loop) as the taffy part, and if you can find something light colored you could spatter it with red so it looks like bloody taffy being pulled. Would be super cool if you could get "demonic" faces/fabric - or fabric that looks like ghosts... see my silly suggestion of why at the bottom.
You'd need to have a bit more tension on the "taffy" since fabric isn't going to weigh as much, so shorter taffy loop of fabric, have the two arms set at more of an angle to keep it a tiny bit more taught during the pulling apart. I would try a few methods: attach/staple fabric loop to a pvc sleeve on each side that spins freely on the taffy machine arms so it doesn't tangle (may or may not work), place fabric over each side of the arms and see if it even needs the sleeves? Will need some fine tuning for sure. But it doesn't have to exactly mimic the taffy pull - just enough of the movement to get the general idea across.
Could also see adding a body part to the middle of the taffy loop as both a counter weight and as a gruesome "don't touch" kind of feature. Like one of those fake arm/hands?
To get the idea across - I definitely would label the contraption with a sign. Silly idea but maybe it will trigger a better one:
TAFFY MACHINE *caution: possessed by demons, please keep all body parts away from area. Do not listen to any promises or commit to trading soul for candy or any other offers.
Use one motor and a common shaft. If you watch a taffy machine in action (youtube it) you'll see that the two sides turn the same direction and - critical part here - stay synchronized. With two motors the arms will eventually run into each other. No matter how close, they will never be exactly the same speed.
I would try to make friends with a local taffy shop owner. If you are able to, I would either bring a green screen or a background of your choice and video it for several minutes. Worse case scenario just set up a cam and tripod in front of the window and record. Most shops place these machines in the front window or visible where the public can easily see them.
While I also thought of using spandex fabric for the taffy part, the reality is that it would not look right. Though, you may camouflage that, by having the spectators mostly see it from one end. However, spandex is actually fairly strong, if you have a bunch of it bundled together. So, your motors would need to be fairly strong. But another concern is if the fabric would tend to wear quickly as the metal prongs slide along it.
What is wrong with actual taffy? Or perhaps another approach is to use slime. There are some recipes that are stretchier than others. Here is one The Ultimate Slime Recipe
I realize the rendering may not be 100% what you plan to do. But, one thing that stands out, is that the old-fashioned type of taffy machine, did not just spit out candy. Rather, the candy maker would remove the taffy, roll it into a long "snake" and then chop it into pieces before putting it in the wrapper. The audience may, or may not, know that. But, if they can recognize it as a taffy machine, they probably will know that wrapped candy just doesn't spit out the side of the taffy kneading machine. So, if you want the machine apparently fully automatic, I would add some extra space and perhaps gears, to make it look like the stuff is being processed somehow. Just a box with the taffy being kneaded and then dropping out the side just doesn't look right.
By the way, i thought of another potential substitute for the taffy... silly putty. It may be vaible to find it in large volumes. But, I suspect it would be stiff enough that you would need a real taffy machine to be able to provide the force needed. Also, I think the slime approach is better, because it can be transparent, and show the stuff you have mixed into it.
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