I like your idea of the handprints. I think they will be more durable and can be easily touched up or replaced if they don't stand up to time and wear/laundry. When there is an addition to the family, new handprints can be added. Make note of the person's name and how they are connected to the family. As to pictures--an album of the generations would be my choice as those will be protected and copies could be made for each family.

You could make a family tree quilt, with extra leaves for new additions and include small wallet type photos (just face) of each, along with their name on each leaf. It depends on how much time and effort you want to put into it. I used Lori Holt's pattern Family Reunion as the center medallion on this quilt, just to give you an idea.
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^^^^^ Love it!!!^^^^^^^^^