Oh I *LOVE* the embroidery drawing idea!!! I will have to do that this year! Thanks Nicole.
Some of the things my kids have done are drawings, photo drink coasters (these are neat!), picture tiles (easy to do), picture frames and ornaments like PPs have mentioned. The coasters and picture tiles are made the same way, only the coasters have a couple extra steps. WIth the picture tiles, you can purchase the tiles from Home Depot. I used 8x10. Have pictures printed in 8x10 size. Take some mod podge, and glue the picture down. Let dry. (I like to occasionally rough up the edges, but that is a personal preference). After glued, take more mod podge and using you brush make all your strokes go up and down (leaving "lines" in the mod podge). Then after that dries, do it one more time making the "lines" go sideways. Once this dries it will have a canvas texture on it. These are great to sit on plate holders on a shelf, and definitely unique. Coasters are made exactly the same, except you buy 4x4 or 6x6 tiles (up to you) and cut your pictures to fit. Then at the end use a waterproof spray over the top. She could use photos of herself, pictures of flowers (or whatever) that she finds in magazines, etc. This is an example (one I just quickly found online) of the tiles (they used glass, I didn't...) http://weddingplaques.com/photo.php
OR if that seems like too much trouble, she could paint on "glass" tiles, like this... http://bmore-urbanforestproject.org/.../jes-tiles.jpg
Last year I just let them loose and do whatever they want. They came up with several miscellaneous crafts (one made a canoe with fishing poles in it out of popsicle sticks and toothpicks for his grandpa who loves to fish with him, one made a stuffed heart that he sewed together for his grandma who had heart surgery, etc). It was actually pretty neat since it was something just from them.