If you have a group of friends, you can do a toy exchange. Each of you bring toys that your children are tired of (and will probably never play with again). Exchange toys with your friends - one toy for one toy, or a couple smaller toys for a large toy (toys must be from the same person). Now you have "new toys" and didn't spend a dime! Just make sure that the toy exchange is without kids so that they don't know that they are getting someone else's old toys.
The Dollar Tree or Dollar store is a great place for books, coloring books, crayons, bubbles, puzzles, and toothbrushes. I've even found Fiskar's brand sissors which usually run over $2. Sometimes you can find neat toys, but the quality may not be there. Be picky with the toys here.
Check out your local library. Often there is a section to purchase books. Children's books are 25 cents each and movies are $1. This is cheaper than Goodwill. It also supports your local library.
Goodwill has a bigger selection of children's books so if you don't see anything at the library to purchase, you can probably find it here. Books are $0.50 and I I think videos are $3. There are usually a good selection of toys, but many could be missing pieces. You can probably find mega blocks or legos for an inexpensive price. I've even found some brand new toys for under $2.00. However, you never know what you are going to find so start looking now. Also, make sure you clean them before you give your son the toys.
Ross is one of my favorite places to look for toys. You can find quality toys, like Melissa and Doug puzzles, for under $5 - $10. I've seen Thomas, Dora, Deigo, Spiderman and other commonly liked character toys. I usually find toys to give as gifts at Ross.
I always hit the after Halloween sales for majorly discounted costumes. My girls love to play dress up so I get a couple of costumes from Toysrus (good selection) or Kohls (small selection, but good prices) on Halloween or the day after (depending on whether Halloween falls on the weekend. It is easier to get costumes if Halloween is a weekday since the stores are less busy). You can get nice costumes for under $7 if you shop carefully. Purchase one that he can grow into and you have next year's costume, too (as well as to wear through the year)!
Keep an eye out for good deals. Once I found Dora's magical Castle at Kohls for $13 (It was on clearance. Normally $100 at Kohls). I bought the entire furniture set from Toysrus.com for $20. (If I were to buy the individual rooms, it was $100.) It was my oldest daughter's Christmas present. 3 years later, she's still playing with it.
2 years ago Toysrus had free playdough with a coupon that we sent in e-mail. No purchase was neccesary. I got 2 of the 3 packs and are still using them. If you look on the internet, I'm sure you can find a good recipe to make your own playdough. My daughter's Kindergarten teacher has parents making the playdough for the classroom. If I had the recipe, I'd forward it to you, but unfortunately I don't.
You may want to use this time to get things that your son needs. Sure it may not be very exciting, but if he needs the other set of clothes or a jacket, toothbrushes, etc. This should be the time to get him what he needs. Have 1 or 2 things that he will enjoy and the rest what he could use.
You could also spend this time for quality time with your son. Bake cookies, make a paper Christmas tree using his handprints and contruction paper. You can find some great activities on the internet. He'll really enjoy seeing his work in the house. You can even use some of his projects to use as presents for your husband and your son's grandparents. Since he is 3, he will really enjoy spending time with you and your husband.
Here is a few websites you can check out for fun and inexpensive activities.
Sorry that this post is so long, but I hope you get some good ideas from it. Good luck! Enjoy your Holidays!