One activity you might want to consider is to watercolor paint a frame for this template:

• Print the template and color in the Y y.  Point out to the child which is the capital Y and which is the lowercase.
   
• Take a piece of yellow paper and allow the children to randomly glue scraps of yarn to it.  I had it in my head that the yarn would go around to nicely frame the picture, but Kaitlyn had different ideas.  I resisted the urge to control the process and just let her make her own artistic statement *grin*.
      
• Point out that Yy is for yellow and yarn
    
• Glue the letters onto the paper (you can do this before or after you add the yarn).