wow, brookem had alot of great tips, so definite listen to her first!
but if you're on a budget, a good thing to do would be to ask what painting supplies your guests could bring along. If anyone has invested in quality brushes or tools then they have some valuable skill and know-how that will be invaluable to you. And everybody has a paint tray and a roller around somewhere, these things don't need to go to waste!
the food thing is a great idea, but make sure to have proper ventilation even if you're using latex paint, it can still become quite pungent and some guests may become lightheaded and feel icky, not a situation lending itself well to a positive working, let alone eating and drinking atmosphere. (I had a friend of mine help me paint a small, hot bathroom with latex paint and he got pretty woozy from the fumes.)
as far as an inexpensive gift for your guests, why not get them t-shirts to wear over their clothes while they're painting? that way, if someone has a paint fight in the street, it will be preserved forever on their souvenir t-shirt from your party. Your guests can even art up their shirts while they're on a break. Packages of white t-shirts or t-shirts from thrift stores will be your best bet as you can buy in bulk for cheap.
if you can specify I'd be glad to help you out mix cds were some of our homemade x-mas gifts this year (and since my boyfriend's family is awesome and loving and beautiful, they loved them, unlike my family...) and they were easy, but more importantly fun & actually quite personal
the best things I've seen from a completely home-based (or in this case computer-lab-at-college-based) movie production is from the program iMovie for Apple. Now I don't know if you have a PC then it won't be much help, but Apple is GREAT about having detailed tutorials free on their websites that the program will navigate for you. AND since Apple iss so great (I'm not biased, no!) the computer has built-in recognition so any implement, be it a plain old digital camera or fancy-pants movie camera, will work with the software. ALSO the best thing to do if you're really serious about movie-making, start hanging around your local college with a good liberal arts program. They will most definitely have film equipment and students around to show you how to use it. So if you or one of your friends go to a school that has a film department you can hang around and learn stuff without setting foot in a classroom. Just remember, ears open and mouth shut. I would also recommend taking a basic photography course. There are alot of people you'll meet who can help you and will give you a much more refined eye for ccomposition, which is essential to any picture, moving or otherwise. you've got alot of work ahead of you, good luck!
p.s. they have all kinds of cool, functional new coffee accessories at Target (I exploited this for my own christmas list, and I'm happily caffeinated as a result). An electric coffee grinder for like 15 bucks, some really good fragrant coffee, and all those new cookie and chocolate thingys, I think they're called Choxie? and they're all on sale! all their gifty stuff is on sale too.
man, somebody had the right idea doing the party after the holidays, everything will be at least 50% off - good luck
eyelash yarn came in handy when a friend of mine and I made some felted soap for a craft fair. Tie-ing things up with yarn instead of ribbon looks way cuter, and since you have so much of it (I've seen those gi-normous balls of yarn, they're insane) you'd have quite alot to embellish gifts with. I used yarn and some $1 printed tape from Target for x-mas presents this year and it went over smashingly.
they also have some alright patterns for eyelash yarn on lionbrand.com, and some cuter stuff in the knitting mag Knit1 by Vogue Knitting.
I agree on the leg (or arm) warmer project. This is also a good time to learn DPNs (double-pointed needles) or Circular needles. Once you get through the first few rounds, it's cake, and it saves you time in the long run! the less finishing, the better!
I haven't done this particular project, but I have used the drop stitch and it does seem intimidating at first. And you're not "unravelling" as much as you really are just dropping the excess yarn from your previous stitch. I actually learned the drop stitch from a horrible tutorial on the DIY network website.
Just dive in, the drop stitch will work itself out. Like most things in knitting: it all seems completely crazy until you suck it up, follow the directions, and Viola! it works. Good luck!
what size needles did you end up using? I've been using sz. 8 and my gauge swatch was way off, but it looks alright so far against a bottle of reisling we have at home. The pattern says to knit until the work is 8 inches long, but it doesn't seem like it's long enough. Did you have to make any changes to make it work?