my son was a gnome when he was two, it was a super easy costume and got lots and lots of compliments. i knit a red hat out of bulky yarn, just a standard hat pattern that i did slow decreases at the crown until there were only four stitches left. then i bought a sixe xsmall kids(l big on a 2-year-old) blue tshirt at the craft store, cut it down the front into a jacket/tunic, sewed up wide a brown felt belt with a "gold" felt buckle that fastened with velcro. he wore brown pants and blue galoshes and a lightly needle felted a beard out of roving with some elastic to go around under the hat, easy peasy! there are a lot of patterns for gnome hats online, both knit and sewn, so i'd take into account your climate and how cold it will be on halloween, and decide from there. good luck!
oh, remembered this from last years halloween issue, the materials aren't exactly "waldorfy" but the effect is great!http://jas.familyfun.go.com/arts-and...&craftid=12050http://jas.familyfun.go.com/arts-and...&craftid=12048