You can make your christmas cookies with a hole in them - then after baking tie a ribbon through the hole  and hang them on the tree - delicious and decorative.   I did this one Christmas in college when I had an on-campus apartment.  and when people come by they can have one as a snack.

My grandparents have these ornaments they made for their first christmas - they are walnuts (whole, in the shell) that are painted and glittered with a loop of ribbon glued on.

You could do a couple of those clove studded oranges - they smell great, and you can hang them in a closet after Christmas, but they're kind of heavy.  To make these, tie a 3/4" ribbon around your orange and make a loop at the top.  Tack it on in a couple of places with pins.  Then start pushing whole cloves through the skin of the orange.  Cover all of the exposed orange skin with cloves.  After Christmas, make sure it hangs in a dry place, that way the orange will slowly dry out instead of rotting!  As it dries it will shrink a little, so you may have to replace the ribbon.

And of course there are always paper chains.

You could cut off the tops of the bottles (I heard they sell a device for doing this at Michael's).  Then if you could sand or melt the top edge so that it wasn't sharp anymore, you'd have yourself a set of huge, funky drinking glasses.  This would be particularly cool if you had some of those bottles with the painted on labels.

This may be a bit involved.  But if you had a present for say, Fred, and you had a card from him from last year, you could cut out his signature from the card, and use it for the "to" part of the gift tag.

Also, you could make your layered cards pop-ups.
You take a long strip of paper and fold it into an L shape.  Then alternate folding the two legs back and forth over each other.  Then you have a springy chain thing.  Glue one end to the front of the back picture and the other end to the back of the front picture.  Ta-da!  Instant pop up!

One of my best friends is getting married in the spring, and I've been thinking of getting some of the sublime stitching patterns and making dishtowels as wedding presents.  I love the 'traditional-yet-edgy' vibe you get out of them.

I made the umbilical cord hat in white for a not yet born baby of unknown gender.  The hat is really cute. I figure if the baby turns out to be a girl, I could sew little felt 'petals' around the end of the cord and make it a flower hat.  I don't have any similar ideas for a boy though.  Any thoughs?

[Alien Illusion scarf]

<snipped>....  Nestled in a bag are the yarns for the Alien Illusion scarf (for my nephew) ...<snipped>

I'm working on the Alien Illusion scarf right now - beware!  The chart is backwards - if you knit it as it says  you end up with black aliens on a green background  That's how my first two aliens are.  Since you're supposed to do 6 repeats, mine will end up black, black, green, black, green, green.  which I think will be ok.  To get it the right way around, I'm reversing the knit vs. purl on every other row, but you could just as easily switch the colors so that you use black when it says green and vice versa.