Here's a cute little mitten pattern from Oliver + s that could be used as an ornament or package topper. It's a good way to use up scraps of holiday fabric and odd buttons and to practice those embroidery skills. If you go to the "distressed" link you can go to Liesl's Flicker page and see lots of examples. The pattern is smaller than some of the pictures look- so you could enlarge the pattern if you want.
I'll admit I didn't follow the tutorial to the letter. I was a little lazy and just went ahead and blanket stitched the two mitten pieces together and then embroidered through both layers. I wasn't going to use them as gift tags, and the knots on the back should not be visible when they are hung on the tree. I also used ½" ribbon to make the hanging loop, but now I think a ¼" ribbon would have been better in proportion to the small size of the mitten. They turned out very cute, though, and everybody loves them. The fabric I used on the cuff is Laurel Burch's Bountiful Blessings with our white felt used on the mitten.
Laurie in marketing had a great idea - she is going to trace her three sons' hands onto the felt and then trim them out like the mittens. You could embroider their names or initials along with the year. This would make a fun annual family project and a great way to watch those little hands grow and change from year to year!