oh, I hate those a swell.
I've often done a craft, and then those single items become the prize. It helps justify a higher price tag, because the craft is *also* the activity.
We did acrylic spray paint stenciling on white towels one year--the towels were something like $5, and I spent $12 for a sheet of sticker paper. Printed letters on the sticker paper and cut them out, then stuck the letters to the towel. Watered the acrylic paint WAY down and misted it over the letters (I did have to buy a whole bunch of spray bottles at the dollar store). Ran it through the dryer to set the paint.
For my son, we did a Knight party, and I bought swords to use at the sword-fight activity, and sent them home w/ people. (the first year, we used little plastic ones; the second year I found the longer foam ones).
And for the first Knight party, we cut cardboard into shields, applied duct tape to the back, and had a painting activity where they painted the shields and put stickers on them.
The *best* b'day party ever was the Nerf gun party; we bought a whole bunch of Nerf guns on eBay so we'd be sure to have them for the party, and then we sent one gun (and some darts) home with each kid. The Maverick is pretty cheap at Target--$12, I think. So whiel that's a lot for the party favor, it's also your activity, which isn't that bad.
Or, if most of the kids have a Nerf gun, you could give them each a pack of the darts as their "favor," and they can use them at the party, too. (you'll have to count to be sure everyone gets the same number to take home)
One year my son went to a party, and the mom had bought a bunch of shirts on ultra clearance and gave them away.
Lego makes some smaller kits that are good party favors, at about $6. In fact, they make a party kit w/ 8 favors ($20 total).
I've also sometimes bought a larger package and split it up--buy an 8pak of Play-Doh and send 2 cans home w/ each kid; markers for littler kids.
For 7yo's, I'd do a Nerf party or Legos.