We made the paper ones when I was a kid, with construction paper and glue. We'd rip them off as we got closer and closer to Christmas. I love the idea of making a felt and Velcro one with the girls! We could make a Christmas chain and reuse it every year!
Sponge Blocks - I would cut them into a variety of shapes. These make great travel blocks because they are quiet, light, compact and have some texture to them to reduce sliding around in cars and other moving vehicles.