A while back I had made my son some lacing cards, just out of cereal boxes covered with pictures from magazines. He still loves playing with his "sewing thing." When he's not lacing the card, he will go fishing with it. :)
One day while I was sewing, he told me that when he was bigger he could get his own sewing machine. He really enjoys trying to help me while I sew, although it is hard to find things that he can actually do to help.
I saw recently a few different ideas for sewing projects for kids. Sew, Mama, Sew has a bunch of ideas for different age groups.
We did our own version. I had on hand a bit of toule that I put in my embroidery hoop. I threaded a dull needle (I think it is a cross stitching needle), and let him stitch away! The holes it the toule make it really easy for him to get through the fabric. He enjoys the chance to use a real needle to sew. When he is done, I will cut the knot off the end of the thread, pull out all the stitches, and let him go again!