I stumbled across this simple little Pi project at SK Pang in the UK, one step up from blinking a single LED --- blinking a large row of them with patterns of your choice, aided by Microchip's I/O expander --- http://www.skpang.co.uk/blog/archives/454
Although very simple, I think it might be worth highlighting as another step on the learning path for budding hardware engineers, particularly given that the costs under one pound from Farnell --- http://uk.farnell.com/microchip/mcp23017-e-sp/16bit-expander-i-o-i2c-i-f-dip28/dp/1332088 . SK Pang are bundling that chip in a "Starter Kit for Pi" together with their Pi cover, breadboard, LEDs etc, which may be convenient if you need a breadboard or cover anyway --- http://www.skpang.co.uk/catalog/starter-kit-for-raspberry-pi-b-p-1107.html
See Nathan Chantrell's site --- http://nathan.chantrell.net/ --- for full details of software and hardware aspects of the project, including variations such as building on top of the well known Slice of Pi expansion board. Direct article links --- http://nathan.chantrell.net/20120519/raspberry-pi-and-the-mcp23017-i2c-io-expander/ , http://nathan.chantrell.net/20120524/python-tools-for-the-mcp23017-io-expander/ , http://nathan.chantrell.net/20120602/raspberry-pi-io-expander-board/ . And finally, Nathan's article about interfacing the Pi's 3.3V I/Os with the 5V device is important educational reading --- http://nathan.chantrell.net/20120610/raspberry-pi-and-i2c-devices-of-different-voltage/ .
At the MCP23017's very low price, this project can be expanded a lot further easily, as 3 address pins allow you to directly address up to 8 of these devices on the I2C bus. There is also a version of the chip for the SPI bus, --- http://uk.farnell.com/microchip/mcp23s17-e-sp/ic-16bit-i-o-expander-spi-23s17/dp/1292238 , and you could in principle use 8 devices on each I/O bus if you have a truly demonic project.
The datasheet for MCP23017/MCP23S17 is available at http://www.farnell.com/datasheets/12170.pdf .
The Pi certainly has rather limited hardware I/O capability, but that's no deterrant for those who want more simple I/Os.