If you have drill or dremel tool, I've had great luck turning chunks of flip flop foam. Don't need anything fancy to get started, I have some more detailed pictures of the process posted here -
http://www.freewebs.com/fountainheadflyfish/apps/blog/
I think some of the other solutions are a bit more elegant, but no reason not to at least get started with stuff you already have around the house.
I use cheap, $1 a pair flip flops. One thing I found, the flip flops seem to be made with one of two different material types. One is softer, and makes great bugs, but doesn't turn as well as the harder foam type. Give it a whirl, it's alot of fun.