I was hoping others would flesh this out, but, as they haven't, here is a bit more:
In the golden early days of the Magic Castle Lou was known as Friday Night Lou because he would do a single comedy show late on Friday nights (around 11 or 11:30 as I recall) in the Close-up Gallery. There was magic, but also lots of mildly risque comedy. More on that later.
In this era Lou also had a column in Linking Ring called Leger-Dermania. It was full of comments on the Magic Castle and advice on performing, but written in a very light tone, full of gags. Sort of like Robert Orben - lots of setups and punch lines to get his point across.
And the wonderful book already mentioned, Add Comedy to Your Act. In addition to some of the best advice on performing ever, it included 50 comedy card tricks. Great stuff.
His brother Bill, as mentioned above, was also a performer and magical author and inventor. Bill's son (and Lou's nephew) Nathan performed for a while at the Castle as Nate the Great.
You can find Lou mentioned 25 times in Vernon's column, collected by RK in the wonderful book, The Vernon Touch. Credit Lou with Vernon's best gag: "Lou Derman gave me a line that I like to use in my opening remarks when I work the Castle: 'I am 76 years old and have been doing magic for over seventy years - I wasted the first six years.'"
Back to Lou's act: it was delightful and one that I loved attending. A perfect night for me with new guests would be to catch Albert Goshman early and Lou Derman late (after which we would leave the Castle and go to the Playboy Club, where breakfast was $1.50!).
He would do such things as:
The Pea Can (and explains in Add Comedy to Your Act how to make this inoffensive)
Scare a sponge bunny into producing "pellets" which he would sweep into a spectator's lap
A cut rope routine with comedy scissors (he had a whole collection of them)
Finding a spectator's card rolled up and protruding from a rubber chicken's bottom. Screaming when the spectator pulled the card out.
And my favorite:
Ribbon spreading a deck of cards across the table and saying, "Think of a card, any card you see. Would it impress you if I reached down and picked up your card? " Lou would move his hand back and forth over the cards, then grasp one of the cards on the end and lift. ALL the cards would come up, to a big laugh, as it was an Electric Deck. "It would scare the hell out of me!"
I've always thought someone should do a book on Lou, detailing his act and including all his writings, as they deserve a wider audience. The missing link is the act itself, with all the tricks and gags. Perhaps a job for Nate the Great.