Ren - I don't know whether to thank you or curse you =p I've installed the Stumble Upon toolbar and I've been having loads of fun/wasting loads of time haha.
Anyways, I've just stumbled upon this awesome website that sells printable fabrics. They come in handy A4 size pieces and you just put them through your printer the same way as you would a piece of paper and then afterwards you just cut out your picture and either sew or iron it onto whatever you want. So many possibilities!!
I would LOVE to do something like this! What an awesome gift it would make.