A useful place to start is "Machine Shop Projects" published by South Bend Lathe Works in the mid 1950s. The original is obviously out of print, but
Lindsay Publications continues to reprint it. You can
buy it direct from Lindsay (and if you get the catalog you'll probably order a dozen extra interesting books), or you can also buy it on Amazon. All of the projects result in things you can actually use. Some of the more complicated projects require castings, which South Bend no longer sells, but the majority do not. (If you were super hardcore, you could even do the castings yourself
)
Projectsinmetal.com is also a repository of lots of interesting basic projects for both the mill and lathe, that are also useful.
RPI has students build
miniature cannons for the introduction to shop class. They are neat, but they really don't require much precision. I'm sure you can find plans for a similar cannon without too much work.
If you want to move into some more advanced stuff, I have several books and websites for model engines too.
[EDIT] If you are going to get "Machine Shop Projects" you should also definitely get the companion book "How to Run a Lathe" by South Bend Lathe Works. Truly one of those oldy-but-goody books (Lindsay reprints the 1942 edition
)! [/EDIT]