I was on a rescue mission a couple of months ago. I bought $37 worth of 100% wool sweaters at the local Goodwill and made tons of things from them. I made 5 scarves, 2 pairs of mittens, oven mitts, slippers, some tiny teddy bears and a child's coat. The one I'm probably most proud of is a felted coat for my great niece. The sweater originally was a good quality women's size small zippered hoodie. I removed the zipper and the knitted facing it was sewn to. When I felted it, it turned out to be a perfect size 3 T. It had some ribbing texture that didn't felt as thoroughly as the plain knit, so I had some adjusting to do on the hood. I had hoped to be able to fold back the edge of the hood to make a casing but the hood had no ribbing on it so it felted more than I wanted it to. I was able to sew the zipper facing onto the hood to make the casing, inserted some elastic, and the hood stayed the size it should be. With some extra, I made faux ties to hang down. It's kind of an unusual color!
I embroidered some flowers---supposed to look like Edleweiss--- and hearts down the fronts and attached Norwegian clasps for the front closure. (I own a dandy BabyLock embroidery machine that is really fun to use.) Another interesting phenom was that the sleeves didn't felt at the same rate as the body either. So, I had to cut off some of the gorilla length and hide a joining seam under the cuff. All in all, it was a good exercise. Yesterday was the first time I was able to try it on the recipient. My niece adopted Annie from Ethiopia when she was a small baby. Annie is an incredible child---beautiful, smart, cuddly, athletic. My niece thinks that Ethiopians have a "happy gene". She does, anyway.
So, I recommend you give this sweater rescue idea a try. In the upcoming Knitwords fall issue, I wrote an article on how to go green with our craft. I'm not the best at this idea, but am at least starting to consider the impact on the environment when I'm making some knitting choices.