I just got some of that on sale myself at Michael's. I made each of my daughters a scarf with it.
With the leftovers, I made a little drawstring soapsack for myself and it is great! It's just the right roughness, and it lathers up the soap beautifully. It dries in a flash after the shower is done.
It was very simple, just garter stitch for nubbiness. Just knit a tube on DPNs big enough for a bar of soap, seam the bottom, and put a drawstring in the top. You could also knit it flat and seam it up. Make a little rectangle, seam it into a little bag, and put in a drawstring.