That fabric color book is adorable!
For newborns I make various knitted gifts, stuffed baby blocks or animals. Or a textured cloth toy. You could also make a set of wipes, if you think they are the type to cloth diaper. Or, I guess wipes would be useful regardless of diapering choices.
I have thought about making books decorated with pictures of flowers, animals,trees, bugs, people they know, etc, and then laminated. (Or photo-safe laminated. If such a thing exists). Or you could make felt food, money or letters/envelopes for the 1 year olds