I've got lots of little bits of yarn around the house, so I was trying to decide what to do with some of it and this is what I came up with:
This is just a simple i-cord about seven inches long, placed around the key chain ring. I used size 6 dpns and did a four stitch i-cord using Berroco Lumina in Infinity and Beyond.
The flower is a super easy pattern from "For the Love of Yarn" found here: http://www.fortheloveofyarn.com/Issues/Spring06/patterns/spring06_stashbust_knit.shtml
I used size 8 straight needles and a combination of Lumina and leftovers of a superwash merino from a shawl project for the flower. Stitch the flower to the cord and you've got a cute key chain. These would make great gifts. You can make the flower and the i-cord any size or color - I'm planning on experimenting and trying out other combinations.