Elf house on a tree! That would be cute in the garden, especially in the tree over grown with ivy. How about some battery tea lights in the windows during outdoor parties. I hear the fairies/elves whispering "home school project" in my ear.
Magic Elf Seeds--Use tic tacs and sugar. The kids plant the 'seeds' before they go to bed and when they wake up they are candy canes! Elf on the Shelf could leave the seeds for the kids to plant that night.