I absolutely love hooded towels. Baby ones are nice and so are the ones for toddlers. The ones my kids got were monogrammed with their names.

My kids also received a couple of crocheted afghans. I love those because you can cover the baby up, but you don't have to worry about a smothering hazard.

If a girl, tiny little hair bows are nice.

These knotted fleece blankets are nice & easy to do.
one way
one more way
just a close up with kiddy print
jan

I'm sure you'll get lots of ideas/posts! I remember someone else posting this 'booboo bunny' here -- I think when someone wanted baby shower crafts. I think it's SO cute! http://familycrafts.about.com/od/easterbunnies/ss/booboobunny.htm

This isn't a craft, but one of my aunts gave me this when my daughter was born: she collected coins in the year of her birth. She was also able to find a $2 bill in that year. It would be cute framed with the baby's name.

Thanks so much everyone. You've given me some great ideas!!