Sprite and I have recently became obsessed with peg people. Here's a Thanksgiving set I made:
Wooden pegs (they come in packs are craft stores)
felt or other embellishments
For most of the people, it's easiest to start by painting the face in a skin color and then the rest of the body in a clothing color. After that dries, you can add eyes, a mouth, hair, and clothing details. Be sure to paint the bottom too.
After the paint is dry, spray with a layer or two of gloss, and let dry overnight.
I used felt to make a hat for the pilgrim and a headband for the indian, with a tiny feather (which I stole from a cat toy).
Very easy! We have several more in the works too. We use them in our cardboard castle. Pics forthcoming!
For Christmas, a peg people nativity scene might be cute...then the kiddos can actually play with the people, rather than just observing them on an out of reach shelf :-)