If you want to make things for the GD you could make a cloth book. Always good for a little one and introduces them to the love of books early. Let her play with inexpensive books so she doesn't get turned off by "no, no be careful of the books" but will look forward to a book being given to her.
You could also make soft dolls or doll clothes or doll quilts (if the others don't :) )
As to books, I still like all the old classics. I think many/most of them are timeless. When my GD got old enough I started her on the Little House on the Prairie series and she loves them and they really got her into reading big time. She's 12 now and reads everything.
"Blueberries for Sal" is a great book. Of course, I'm particular to it as she is a "Sara" who is called Sal and I'm a Sara who is called Sally. I first read it when I got my first library card at age 7 and I think the librarian recommended it because of the name similarity. I remember it to this day.