Nice post today on Blogging Baby on the ideal contents of a toddler's arts and crafts kit. Lots of good reader comments, too.
I have to second Jennifer's pipe cleaner inclusion — we have so much fun with pipe cleaners around here. Our local dollar store sells big bags of pipe cleaners in different shapes, colors and textures. I recently made a pretty fairy princess out of pipe cleaners (both the chenille and the sparkly varieties), a wooden clothespin, a feather, and a bit of felt.