The Selenites in the examination chamber were animated, but Suitmation was used in the scenes (first contact, and killing the giant caterpillar) where there were a lot of them involved, and animation would have been too difficult (which is why Harryhausen did the giant octopus in It Came From Beneath the Sea with only six arms - even a genius like him had his limits). We're spoiled these days by CGI that makes such animation relatively easy. I agree, though, that the live-actor Selenites were not nearly as effective as the animated versions, which truly looked "alien".
I really like this movie, not least for its special effects, which were impressive for the time, and still hold up as well today as in any movie from that period. Not just the animation, but the realization of the Selenite's underground habitation as well. I particularly love the way they use crystals as power sources, a couple of decades before "crystal power" became popular here on Earth.
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"Oh, well" said Zanoni, "to pour pure water in the muddy well does but disturb the mud !"
While I'll agree that the stop motion Selenites were better, I enjoyed the costumed ones as they allowed for more direct interaction. We wouldn't have had any closeups of Arnold striking the Selenites or the one hopping on his back and putting him in a chokehold from behind.