I'm always looking for crafts that reuse things we've got around the house. I'm both environmental and cheap :) We've now made two batches of recycled paper and it's been lots of fun!
With Toddler: My one-year old helps collect the shredded paper (turn old bills into something fun, yes please!) into a medium sized container. Warning: Shredded paper is in and of itself fun for tots to play with! Prepare to clean up shredded paper.
You can make more paper than you might expect so keep it reasonable your first time, maybe a large yogurt container full of paper (bonus recycling!). Then you and/or your tot can pour in the water! Just fill the container enough so all the paper can get wet. You can let it soak for a day for best results, but if your not patient it will be ok.
Just Mom: Add a little more water and blend the paper/water to pulp! I like using my stick blender but a traditional blender works great too. Tip: Watch out for shredded credit card offers. Plastic doesn't make good paper. You might have to add more water for this step.
Make your frame! I just used a picture frame and mesh fabric. I used a staple gun to attach the mesh fabric to the frame. A lot of websites I read suggested metal mesh, like for window screens, but the fabric worked just as well. Make sure you have a container big enough for immerse the frame in.
Put the pulp in the container and add more water. It should be a nice watery slurry. I ran my fingers around to separate all the pulp. Then immerse the frame and get a film of pulp on the frame. Experiment! You don't want it too thick or too thin.
Place a towel or something on top of the paper to transfer it off of the frame. You can use a sponge to press extra water out as you remove it. Leave it out in the sun to dry - or use a hair dryer to speed it up.
With Toddler: Use the paper! We made homemade finger paints with cornstarch, sugar and food coloring. Here's a great recipe. There's lots you can find on-line. We didn't use fingers to do the painting though. Paint brushes, q-tips, sponges, and fingers are all great methods for small people painting.
Since it's spring I made some outlines of butterflies and bunnies for her to paint. We also did a few freestyle paintings that we folded in half for cards for her aunt and others. Recycled paper (at least mine) isn't ideal for writing, but since she can't write it's no problem! I found it desintegrates a little faster than bought paper so you don't want your paints too watery and you want to limit the amount they use. We had one container dumped on a paper that turned to goop. I left it to dry and it became mostly one piece again.