To tell the truth, I was also thinking about making ornaments that were balloons covered with yarn coated in glue, and then once it is dry you pop the balloon. Does this ring a bell with any other former Girl Scouts?
Anyway, I digress. I finished the first string bag which is Jodie Danenberg's Saturday Market Bag. I altered it by knitting in the round, knitting a flat bottom to pick up stitches to knit in the round, and then tying the straps at the top in a knot. Anyway...this knit up very fat and looks good. It is much stretchier than it looks. This was knit in Cotton Fleece which is one of my favorite workhorse yarns. So overall I'm very pleased.
I found numerous string bag patterns...I've posted some links over at KR if you're interested.