We made blankets one year. Everyone loved them and the kids still use theirs to cuddle.
A magazine subscription to National Geographic Kids has always been a big hit with our niece and nephews. They love getting mail. Give them a reading light so they'll have something to open Christmas day. :)
Last Christmas, we had a Thrifty Challenge. Every gift had to be handmade, or purchased from a thrift store or tag sale, or it could be a re-gift. We had a blast opening presents! The kids had fun too. My oldest received a Cookie Jar filled with homemade cookies. :)