The Deputy Headmistress just posted about a neat way to decorate candles, that even little kids could handle.
It reminded me of something we did a couple of times when our Squirrelings were small--and I mean REALLY small: custom-decorated bars of soap, the same way as Polly's Pointers recommends here. (Shows you how old I am that I remember Polly's Pointers?)
Short version: you need bars of soap, tissue paper/markers/or some other kind of thin pictures, paraffin, and something to melt it in. How to: cut a piece of tissue paper almost as big as the bar of soap, and have the child decorate it (colourful scribbles are fine). Dampen the top of the bar of soap (no, DHM, we didn't spit on it) and press the picture onto it. Then either dip the top of the soap into melted paraffin (parent's job) or brush it on. Let it harden and give to delighted grandparent. The decoration will last a very long time, even if you actually use the soap--the paraffin layer protects the picture.
Or you could use stickers, tiny dried flowers, or something like that instead of making your own picture. But honestly, nothing beats a toddler-drawn portrait of Grandma.
And just saying--paraffin is hot, dangerous, flammable, and everything else, so be careful and keep small kids away from it.