Oooh! I asked this question awhile back here and got some really great ideas.
My father is a woodworker and built a few toys for my son. His favorite, though, is a wagon my dad built after the one at Nova Natural (here: http://www.novanatural.com/baby-toddler/toddler/walkers-wagon). My dad built his own pattern and filled it with blocks he made and my mother painted. By far, I think that's been his favorite gift (though his birthday was just a week ago).
We're attending a birthday party for a friend whose son turned one this week, too. I hand dye playsilks and so I'm giving her son a "landscape" set that includes a brown silk, a blue silk and a green silk. Hopefully, he'll find plenty of uses for them!