I just discovered the SouthWest Trading Company, which makes eco-friendly yarns that look mighty tasty. Bamboo yarn, what's not to love?
In fact, Better Homes and Gardens (of all places) did a whole slide show of eco-friendly yarns. (Just tell the pop-ups to go 'way.) Nifty! There's an organic cotton one I like the looks of, too.
There's a wonderful article in a recent issue of The Horn Book Magazine, a journal about children's and YA lit. The author, a teacher of fifth-grade English, does this really cool exercise with her students that makes creative and constructive use of Mary Sues.