Lion Brand Homespun
is super-soft, easy to work with and fairly inexpensive... I made several ponchos, hats and scarves with it so far, and am currently tackling a halter top.
Side tip: If you shop yarn on http://<a href="http://www.joann.com...ATID=82241</a>
, they discount an additional 10% (5 skeins or more) on top of whatever sale is going on, plus if you search for coupon codes, you can get free (or reduced) shipping.