A couple ideas (in addition to the salt dough ornament):
I just made a cute felt handprint ornament. I first traced DS's hand onto paper. Then I cut out the paper handprint to use as a pattern for cutting out felt in holiday colors. I stitched the year on one of the felt handprints, then stitched two felt prints together using the blanket stitch. I inserted a length of ribbon in the middle finger as I stitched it together, to make a hanger. Turned out very cute.
You can also make press you LO's handprint in femo or sculpy clay, then bake in the oven to set up and harden the clay. Before baking, us a straw to cut a small hole for a ribbon to hang the ornament.
Another idea is to put handprints on clear glass balls using glass paint. Or onto ceramic balls using underglaze at a ceramic studio (if you have one in your area).