We do real simple parties but at my son's 4th Bday I got some of that Funky Foam stuff. I precut them into the shape of a picture frame and then also bought the ones that come in assorted shapes. The kids just glued the shapes onto the frame.
As each kid arrived at the party I took a digital photo of them with the birthday boy. Then as everyone was eating cake, Dh printed out all the photos. Then Dh glued them each into the appropriate frame and the kids took that home as their favor.
We took one photo of the whole group for Ds' frame.
That kind of knocked out the craft and the favor at the same time

It was age appropriate for my 3 yo as well. Though the oldest we had was 5, she did seem to enjoy it.