Found at Meri Cherry, these simple sock puppets are a great little gift for kids and easy to make too. Although these buttons are glued on, if they are for children under three then it's best to stitch the buttons on.
I love these Fisher-Price inspired polymer clay dolls at Teawagontales! They are wonderful for pretend play or to give as gifts. You could customize them a bit and they would be adorable party favors too!