I do a print making project with yarn...Have the students draw on old cardboard (I do self-portraits) then they glue the yarn over the lines...and make a print..they love it and it comes out beautiful!!!
Also I have found that my 4th and 5th graders love love love weaving! You can make simple looms out of wood and nails or even more simple, out of cardboard.
Someone had a wonderful weaving lesson here for 1st graders...I am doing that this year. Weaving is great for fine motor skill development.
Also using large woven rug canvas (I am not sure this is the right name..it is the stuff you use for rug hooking) You can have students sew...again, great for fine motor development using plastic tapestry needles or even plastic garbage bag ties as needles.
I also tried to do a knitting project with my 5th graders...we ran out of time...but I am going to try again in the fall. They were really excited about knitting...so I thought it would be a wonderful skill to teach them...also you can incorporate pattern, color theory, etc...
I too inherited tons and tons of yarn...don't throw it out...just use it and don't order any more for a really really long time!!!
Good luck....I am on my third year....I swear..it does get easier...even if only in small incriments!!!