Yes, we Wal-Mart Christmas Warriors must stick together (in that Christmas-Eve check-out line!)
I love your idea about the dishcloth wrapped around a bar of soap! Tie it up with a pretty ribbon treatment, or maybe wrap it in some clear cellophane wrapping first (check out your local $1 store, as well as Wal-Mart. They usually have rolls of the clear cellophane wrapping for about a $1. It's great for wrapping up knitted stuff since everyone can see the colors right away!)
How you present your gift will go a long way toward giving it the honor it deserves. After all, it's hand-made so some time and thought and care went into it!!!!!
I like to take smaller knitted items and wrap them up like those party favors that have the paper twisted at both ends (I think they call them crackers). Just roll the item up in the paper (and here cellophane works well), twist the ends and tie them with some pretty but cheap ribbon and you've got a nice little package to hand to the recipient! Works great!
Hope we can both avoid the Wal-Mart scene this year!!!!! Just keep knitting and maybe we will!