Origin: As pleased as Punch' derives from the Mr. Punch puppet character. Punch's name itself derives from Polichinello (spelled various ways, including Punchinello), a puppet used in the 16th century Italian Commedia dell'arte.

 

Punch and Judy shows, the popular summer-time entertainments on British beaches, have been somewhat in decline from the latter half of the 20th century onward, due to them being seen as politically incorrect. That's hardly surprising as the main character Punch is a wife-beating serial killer.

 

In performance, the grotesque Punch character is depicted as self-satisfied and delighted with his evil deeds and squawking "That's the way to do it!" whenever he dispatches another victim. Nevertheless, there is still what might be called a folk affection for the old rogue in the UK and it would be a shame to see the tradition fade away completely. 

 

The show had an Italian origin and has been much changed over the years. It began in Britain at the time of the restoration of the monarchy in the 17th century. 

 

The phrase 'as pleased as Punch' appears fairly late in the story. The earliest known record is from William Gifford's satires The Baviad, and Maeviad, 1797:  Oh! how my fingers itch to pull thy nose! As pleased as Punch, I'd hold it in my gripe.

 

'As pleased as Punch' is now the most common form of the expression. When the term was coined it was just as usual to say 'as proud as Punch'. Charles Dickens, for example used the two terms interchangeably in his novels. For example:

 

David Copperfield, 1850: I am as proud as Punch to think that I once had the honor of being connected with your family.

 

Hard Times, 1854: When Sissy got into the school here..her father was as pleased as Punch.

 

Source: http://www.phrases.org.uk/meanings/as-pleased-as-punch.html