C pretty printer -- takes a C program and "prettifies" it, i.e. re-
  writes it with proper indentation, etc.
2 students

C preprocessor -- takes a C file and handles the preprocessing commands 
  (#include, #define, etc.) and generates a "pure" C file
3 students

Lex -- your own (simplified) version of the lexical analyzer generator
4 students

LL(1) parser generator -- takes a grammar and builds an LL(1) parser
  program
2-3 students

LR(1) parser generator -- as above, for LR(1) grammars = your own
  simplified version of yacc
4 students

latex2html/html2latex -- takes a LaTeX (typesetting language for 
  formatting text) input file, and generates an "equivalent" html 
  file, and vice-versa
3-4 students

html2text - takes an HTML page, and generates a properly formatted
plain text version of the same
2 students

Static checker for C -- takes a C program and performs static checks
  on it (e.g. syntactic errors, reports type mismatches, whether a
  variable is being used without initialization/declaration, etc.)
3-4 students

Software simulator for 8086 or 8088 CPU -- "virtual machine" for the
  8086/8088 instruction set (program will take a program in machine
  language, create an "address space" for the program and then run it
  in that address space)

Syntax directed editor for C
2-3 students

GUI/WYSIWYG front end for LaTeX

Markup languages for chemical equations/mathematical equations -- you
have to design the language, write a parser/validator, and write a
renderer (using Java / GTK / Motif / XSLT+Browser etc.)