What kinds of things normally get done?
Can you get some kind of industrial link to it?
How much time do you have, how much resource do you have?
As an idea, here are the projects I worked on at uni (not completly relevant as I was a software engineer, but gives you an idea of the types of things that get done).
Our final year project was a group project which was sponsered by a company .I will refrain from mentioning them, but as project sponsors they were rubbish, the projects and sponsors were arranged by the university and we drew the short straw on our sponsors, in the end we had to do a different (but related) project. It was a fuzzy logic control system, that could be linked to a PC or worked on it's own, that would balance a ball bearing on a beam.
Third year project was a solo project PLD Shell to PIC translator, PLD shell is a hardware description language used for chip design. My task was to try and simulate the circuit on a pic microcontroller.
As a 2nd year was a group project we did an image processing demo system on a single board computer (which meant that we had to write all the primative stuff to actually draw text or menus etc), as well as to drive the
1st year project was to implement text to speech rules for Spanish. Ie given a Spanish sentence construct the phonemes to send to a speech synthesizer.
Hope that gives you some ideas!