You could also take washcloths and do an icord around the top and add longer tails on both ends and make bibs, how easy would that be.
For a gril, litlte headbands in all colors for matching outfits,
Little boy how about a little velcro closed in back bow tie
felt a nice diaper bag, choose a purse and make it bigger, add pockets
the kitty pie bed in an oval shape would make a cute baby napping on the floor bed, ok maybe not
how about a baby wrap for after bath, looks like a small afghan with a hood for the head in the corner
How about a teddy bear, with a pretty matching color coordinated ribbon
how about a set of matching hats for mom, dad and baby, the new family set
make a cd of soft lullabye songs and knit a envelope to put it in
you can take yard of fleece and simply edge it in a nice lacy finish or do a cool nicky epstein style edging and personalize it, now this i think wouldbe crocheted but I wonder about how to knit an edge on a blanket, gonna have to investigate that.
take baby socks, if you dont knit them and edge those as well with fancy finishes.
knit a pillow for the baby room in the colors used.
knit baby balls for toys, soft and colorful in a range of sizes