For the chalkboard idea, you could even buy a small can of chalkboard paint and paint some old piece of wood, or even part of your wall. Chalkboards give me the willies, but they do look nice
Do you sew? Could you make your daughter doll clothes? Maybe you could find them on some kind of swap if you make something else. If not on this site, I really like Craftsers.org and they do swaps.
For music, maybe you could hit up the 1/2 price book store and buy some simple music book or sheet music.
As far as the bookstore, my kids love books and last year I was able to get them a whole bunch there for like 50cents to a buck a book.
If you do craft supplies, wait until August and stock up before school.
For your three year old, would she like Felt food? That is pretty simple to make or swap for.
We also always do Pajamas. Sometimes I can find them at the 2nd hand store, and sometimes I order them new from like Old Navy. Even at full price, they usually aren't too expensive...or Children's Place always has them too.
Do you knit or crochet? My grandma always made slippers for us...They were the BEST!!
For grandparents, I found this cool idea to have your kids put their handprints on pillowcases in some sort of nice color that would match the recipient's decor. I think I am going to do a whole sheet set for our families. And you can buy really nice 100% sheets from IKEA for like 12 bucks for a whole set.
I really like to sew, so a lot of my gifts will be made like potholders and wall quilts.
I will probably make ornaments too and have the kids help. I have purchased a lot of holiday books at the used book store for 3 or 4 dollars a piece over the last couple of years, so I have more ideas than I could possibly make!
If you use tins, hit up garage sales this summer and Good Will...that's a great place to find them!