I love the adult sized hat loom to make bags/purses.  I make the hat shape with a brim, and gather to remove.  I then crochet a tie to weave in an out of the top just under the brim.  It makes an adorable bag!

Baby hats made on the newborn loom and on the sock loom. (Sock loom makes a preemie hat to fit a 4-5 lber)

2 looms and a tool I purchased from 
http://www.knittinglooms.bigstep.com/

Preemie hat in progress, showing how the inside would look as you work.  I hold the loom in my hands with this side facing me so I can see inside.