She had a brilliant idea that she got from her mom (you see – her mom recycles, too)… use the peanuts in bean bags.
How many times have you seen a very sad, deflated beanbag? Well, they’re normally filled with polystyrene (yes, that’s the same stuff as most packing peanuts). So my friend’s mom would fill up the bags about once a year (or whenever they needed it). To help make the peanuts softer, you can insist that the kids rough house for a few minutes to soften up the peanuts. I don’t know too many kids that wouldn’t want to do that.
Just think, your kids can get what they want, you get what you want and you help do your part by reusing.