Ideas I thought up are listed below, but feel free to try your own thing if inspiration strikes.

• Write a FUSE filesystem that mirrors a directory tree like xmp.py but performs some basic transformation on the contents of the files involved, like replacing some letters with num63r5 or putting words into Pig Latin.

  Expansion: Also transform file and directory names.

  Expansion: Make your filesystem writable, and modify the original file after performing the reverse of the transformation.

• Make a 'real' FUSE filesystem that has write functionality and stores data in an interesting way. The simplest one to implement would just store data in memory as python objects, but you could also store data in a single regular file, for example a tar archive using the tarfile module. More ambitious projects could store data in sql.mit.edu or some other non-file-based storage. (This type of thing is probably the most popular thing to do with FUSE.)
• Make a filesystem that allows data normally accessed by specialized commands to be treated as files; for example, a filesystem that allows the modification of Moira (blanche) mailing lists or that lists processes on the system as files and kills those that are deleted.
• Use the FUSE context to implement a filesystem that shows different file contents to different users, perhaps filling in a template. This could be used to create personalized MOTDs and other configuration without modifying the programs involved. You may find the Python pwd module helpful.

• CGI is commonly used in webservers (eg, scripts.mit.edu). Instead of returning a file stored on the server's disk, the server runs a program each time the file is requested and returns the resulting output to the browser. Write a FUSE filesystem that reflects a directory of programs, but when the files are opened, shows the program's output instead of the program's text. Each time the file is opened, a new output should result. /mit/sipb-iap/www/2009/fuse/cgi-examples/ contains some programs you could test your filesystem against.

  Expansion: Since your programs' output could be different every time, make getattrs on files in your filesystem always indicate that the corresponding file was just modified.

  Expansion: CGI is often used with parameters. Implement a way to pass command-line arguments with your filesystem and test it out.