For parent Christmas gifts I had my students make bread coverlets out of white or beige cloth napkins. Using red fabric paint I had them put their hand print in one corner (palm toward the corner and fingers toward the center), and in the opposite corner, with a fine-tipped green fabric marker, I wrote the child's name and the year.
If the napkins are new, having them monogrammed for a gift would be personal, stylish and sophisticated.
Also, I use colorful cloth napkins to line baskets of goodies that I am giving as gifts.
Not crafty, but I buy cotton and linen table napkins at Goodwill and use them in the kitchen for hand towels and cleaning. (The polyester ones don't work well at absorbing water.) Much more economical than using paper towels since you just toss them in the wash when they are soiled.
On a crafty note, you could use interesting print napkins as fabric in small sewing projects like wallets,or piece and quilt them into placemats.
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Where can I find directions for making a purse out of a linen napkin?
I've found all kinds of patterns, just by Googling. There's a craft site called Craftster that has patterns and tutorials.
Whatever you make, you might need to underline the fabric to make it thicker, and then line it with a coordinating fabric.
You could just make a square purse by folding it in half and stitching up the sides and adding handles that you can buy in a craft store or stitching up straps in the same or coordinating fabric. Add velcro or a button to keep it closed if you like.