With all the talk about China (lead in paint, antifreeze in toothpaste, driving over tea leaves to dry them) I thought I would highlight some stores which sell items that are homemade, natural, and not made in China.
This toy store specializes in wooden toys and has a special section called "Not Made in China". If you're still concerned about your rugrat chewing on paint, they have toys that are not painted as well. They only sell wooden and classic-type toys including blocks and trains--no batteries here!
This is a website which allows for people to buy and sell homemade wares. If I could (and had the time), I would love to do this. You can do a search for toys, clothing, household goods, etc. For a little taste, check out this set http://www.etsy.com/view_listing.php?listing_id=9898565. Cute!
This store has montissori-type toys. They have kid-sized household items for pretending (and "helping") like brooms, dust rags, ironing boards, etc. They also have swings that look like ships and other goodies to fulfill all your creative whims.