Washcloths and dishcloths and hotpads are really fun projects to knit, both because they are small and because they are a great way to try new techniques (also, having something you made that you can use every day is pretty cool, too).
The Water Lily pattern from Knitting and So On is a great option because in addition to being a fun, small project with some great techniques in it (short rows and changing colors), it also comes out a really fun shape, not your regular square or rectangle.
I love the idea of knitting a pair and using them as hot pads. I also like the idea of blowing this project up to a shawl size. Either way it looks like lots of fun.
[Photo: Knitting and So On.]
Not too long ago I did a test knit for another designer that was for a cabled cardigan. It’s really cozy and nice but it just about broke me in a ton of different ways. I couldn’t get gauge, which I suppose is my own problem, but mainly I was somehow both bored and forced to pay attention at the same time.