Once a month I teach an art class in my son's first grade. It is so much fun, and so gratifying - particularly since here in California there is little time for the arts in public school. Last month we did illuminations. I brought in several medieval pictures (here's the initial S, The Conversion of St. Paul, c. 1440-50, by Antonio di Pisano) and then we made our own "ABC-darium" book of letters, each child making their own letter picture. The kids really liked (in addition to the pictures of knights and swords) the idea of hiding letters within a bigger picture, and also liked incorporating tin foil (poor man's gold leaf) into their designs.
There are troves of brilliant art history art project ideas on the websites of the major art museums in the education sections, if anyone is interested. Two of my favorite resources are the Getty Museum and the National Gallery of Art -- the National Gallery will even let you check out, for only the price of postage, all kinds of materials. I haven't tried it yet, but definitely plan on it...
I'd love to hear other ideas for great school art projects!