I love the colors that homespun has, but I didn't enjoy knitting with it. For one thing it hides the stitches so I feel like what's the point.
It would be a nice warm blanket, but of course two skeins is not enough for that. On the Lion Brand website they have a lot of patterns for each each yarn. Here's the one for homespun. Maybe you can get an idea from there for a smallish project. A hat or two or a baby sweater maybe?
Scroll down:
Homespun patterns