I LOVE hand-knit socks, both to wear myself and to give as gifts! It's an awesome gift, even for someone who doesn't really know about hand-knit socks. They get the idea really quick once they wear them!
Just a couple of suggestions - Superwash wool is usually a good choice, especially with the hectic schedules most folks have today. Hand knit socks will last for years if they're taken care of properly and hand-washing them might be outside the reality of some folks. Also, a percentage of nylon will help prevent wear and tear at heels and toes. Otherwise, Jawohl has a great selection of reinforcing yarn in lots of colors that can be knit right in with the yarn you're using and it will add lots of strength to your finished pieces. I use it only for heels and toes so one little 45 yard spool goes a long way for me.
If you're new to sock knitting then I'd strongly suggest Ann Budd's book "Getting Started Knitting Socks". It's totally terrific and the instructions are shown with DPN's, which you'll be able to use comfortably. Also, there's a lot of basic information that will help you perfect your sock knittng skills! One particular thing is her instructions for the Old Norwegian Cast on. It's marvelous and you never have a too-tight cast on to ruin a beautiful sock!
Good luck and keep us all posted on how you're doing.
Happy sock knitting,
PS - I LOVE that Arabian Nights yarn. It's GORGEOUS!