My favorite thing to do with handspun? ... hmmm. To have a project in mind, really. It's "okay" to just spin, but I like to know where I'm going with it. LOL, I have a large enough commercial yarn stash, don't need more of that. I've knit alot of hats... enough socks tofill my own drawer and to have been repeat gifts to a variety of people; mittens for the kids in a variety of sizes (they do keep growing!) So I think I may soon be willing to tackle a sweater. Heck, it might be nice to have a project that takes a looooong time to finish.
Mostly, I knit with my handspun -- hands down more enjoyable than knitting with commercial yarn; it just seems to have more bounce to it. My mom, not a spinner, agrees with me -- so her favorite "gift from me" is handspun yarn, LOL. Even then, I like to picture what she might do with it as I spin it.