Pillows are great idea. You can get light colored squares of fabric (maybe cut from a worn out cotton shirt etc.) Use fabric markers and have each child draw a picture about a book that has been read to them. Sew squares together makes a great wall handing for the classroom, library, or hall way.
Everyone has an odd sock somewhere. Stuff with old washed hose or fiber fill. Have kids use tapestry needles with yarn sew top of sock closed. Turn cuff down to make a hat. Use fabric markers to draw eyes, nose and mouth. Result a soft play toy for a pet, baby sister or brother. couple with a story about a snow man..combines literature art etc.
Anything you do .. make sure you involve the room mothers of your PTA. I have tried these ideas in my 34 years of teaching. These projects can combine art and history and other studies. GOOD LUCK.