C.M.
Get some foam door hangers at Michaels and let the kids color, paint or decorate them with stickers or foam stickers.
Make paper puppets. Print out different holiday pictures. Get sticks of some kind (we used leftover paint stir sticks that we didn't need). Color the picture then cut it out and glue it onto the stir stick. You could even print out both sides and have them stuff it with some batting. You could take this one step further and use felt or paper and trace holiday shapes to make holiday puppets.
Make a sock pillow - ask them to bring in leftover 'sock's from the wash that they would otherwise throw away as well as scraps of cloth/old clothes they no longer want. Get a glue gun and buttons that you can either sew on or pop into the fabric. Cut out a shape of a pillow (heart, square, etc) and fill with the leftover socks). Decorate with paint and other embellishments.
Have them make a scrapbook type layout for Christmas morning. Then all the parents have to do is put the Christmas pictures in it.
Make a wreath - you can do this a lot of ways - with pinecones, buy ones that already have the greenery and have them decorate with real or fake Christmas candy, ornaments they have created, cut out handprints, etc.
Make a handprint wreath - have them color/cut out their hands traced and make copies of them - enough to go around a wire circle. Glue them slightly end over end.
Have them make a holiday light. Ask them to bring in an empty wine bottle. All you need is something to bore a hole in the glass without breaking it, a small string of Christmas lights and something you can use to decorate on glass (paint or markers). Drill a hole and feed the lights through it and they will 'sit' in the decorated wine bottle. These look really nice sitting on a kitchen counter!
Ornaments are always a good idea - whether they are simple picture frames or something more intricate. Look at Michaels (or Hobby Lobby).
Good luck!