i like the letter and the idea of being up-front about it, but i guess no one has high expectations of big, fantastic presents from me & dh so i don't really even have to tell them. we've always done one small gift or home-made.
over the years, my extended family has done home-made, adopted another family, limited it to one gift (for kids only and from my parents to adult children, but no other exchange among adults), drawing names, etc. this year we're doing a white elephant party, but my mom will still get gifts for each adult and the grandchildren. i will make something for my parents, niece, nephew and teenage brother.
on dh's side, it's pretty much just his mom. we usually buy a small present (a book, bath stuff, grandchild photos). she goes out of control, buying tons of junk that we don't need and she can't afford. dh has talked and talked to her, and it's never going to change. we just get rid of everything we don't want. the kids don't notice or care. dh also has a sister and two nieces, but doesn't really have a relationship with them. in the past, we've given his sister gifts and then his older niece when she was born, but haven't even really seen them at all since the younger one was born. i'd like to make something for the girls - at least i could give it to mil to give to them, if we're not going to see them.
i have a recipe for a yummy (very popular!) vegan treat
i've made for the past 3 or 4 years. equal parts dried sour cherries, dark chocolate chips, cashews, and tamari-roasted pumpkin seeds. you just mix it all up and put it in jars. no cooking! it's kind of expensive, but worth it.
eta: friends! dh has one friend he must buy a present for, a CD or book so under $20. i don't really exchange with my friends. if i do give something to a girlfriend, it's just because i happened to see a fancy little treasure at the thrift store with her name on it. we really on spend money on supplies/ingredients and those couple of small items, so like $100 total.