I recently went to our local craft store to buy something totally unrelated to felt, and wound up walking out of there with about 60 sheets of the stuff, due to a well-placed "SALE" sign. So now, with a bunch of felt on my hands and kids in the house to entertain, I'm resolved to make as many neat things out of it as I possibly can!
My first project was felt donuts. These were super easy! Just cut out the basic shape, sew the outside shut (I did it by hand with a kind of whipstitch ... but you could totally use a machine), stuff with a tiny bit of batting, and then stitch the inside closed! Then I cut out different 'icings' for the kids to use for mixing and matching. I added 'sprinkles' to some of the icing by sewing with some thick craft thread and an embroidery needle.
My kids adore these! I think I'll probably make another few sets of them. If you didn't have really little kids in the house, you could even sew up some donut holes to go along with the set, out of the circle cut from the middle. But I was worried they'd be too small, so I'm saving those little circles for some other fantastic project .... I just don't know what that will be yet!