I like your search engine…my next project is going to be a felted bag, and for that I need wool. I found 15 color very quickly in the weight I need…I think I will be back after I finish my current project! 
Ooh, PM me a link, too, please.
One thing I like at my LYS is that they have knitted swatches of all the yarns, so I can see what it looks like knitted up. An online store that posted photos of a swatch, as well as the yarn on the skein, would be a plus. If you have forums or something where people post pictures of their projects, links to those from the yarn page would be pretty cool.
Yardage calculators are nice. Calculators that estimate how much yarn is needed for a long-sleeved size 16 sweater (for example) are superb. The ideal yardage calculator would give me checkboxes or drop-down menus for pattern elements (is it a turtleneck, does it include cables, waist-length, hip-length or tunic-length, etc.) and then tell me how much yarn to buy. Right now, I do this by leafing through the patterns until I find something roughly similar to what I want to knit, and checking how much yarn the pattern says to buy.
A lot of good suggestions from my fellow knitters. A few more things…
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It’s been said, but I’ll reiterate - pictures of the yarn knitted up, especially for variegated yarn. What it looks like in the skein often bears no resemblance to what it looks like knit up.
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A nice, clean, professional-looking, well designed site. A lot of smaller online yarn shops (and some of the big ones) look like they were designed by a 12-year-old on Geocities. Make sure the site renders correctly on all the major browsers.
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Knitpicks has a feature where they show a piece knitted up in one of their yarns, and they provide a little chart to show how many balls of what yarn are needed for a given size. I love that, and I am more likely to buy both the pattern and the yarn.
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This is a bit more ephemeral, but…make friends with knitbloggers. Almost all of my online shopping takes place because one of the blogs I read said “oh, did you see that Socks That Rock is on sale at myfavoriteyarnstore.com?” The knitblogging community is remarkable, and we’re always pointing each other to good online (and meatspace) shopping. While I’m generally not looking for “content” in an online yarn store, I know of several yarn stores that keep a blog, join a bunch of blog rings, and drum up a lot of business that way. A blog that is an obvious attempt to get more business might not do so well, but a blog that says “this is my knitblog, and by the way I own awesomeknittingstore.com” could do great things.
In any case, thank you for giving the world more yarn, and damn you and your kind for eating up all my income. Also, a PM with a link would be most appreciated…gotta keep feeding the habit. 
PM. Brilliant idea! I’m just starting to think about my next project.
What draws you to knitting/crochet web sites? Cost, particular products, attractiveness of site, ability to navigate and search, customer service, …?Products first, navigation and searching next, then big, good, well photographed pictures of the yarn.
Would adding “content” to the site be appealing? For example, a tips and tricks section? A “learn to knit” section maybe. Might draw newbies, and then your wonderful pictures will entice them to spend.
How about tools like needle size charts, yardage calculators, metric/US conversions, etc? Yes, please, it’s nice to not have to open a new tab/window to google your conversions.
How about the ability to have your own personal page where you keep track of what size needles you have and post pictures of your projects? That would be neato
Would having free patterns attract you to a site and then make you want to buy yarn, or would you just print out the pattern and then shop at your LYS? I’d destash with free patterns, personally. But I do love free patterns. I’d check back often if I knew you added patterns often.
Any other ideas to attract and serve knitters? Don’t make me give you my email address and phone number to look at your goods/additional information/patterns. I’m looking at you, Lionbrand
Your site has a nice layout and is easy to use, but I just noticed a major omission - washing information from the yarn label. If I can’t tell whether a wool is machine-washable or not, I won’t buy it (sometimes I want it washable, sometimes I don’t, but I want to know).
What draws you to knitting/crochet web sites? Cost, particular products, attractiveness of site, ability to navigate and search, customer service, …?
- availability of the product I’m interested in, in the color and quantity I want
- customer service
- not losing track of what’s in my shopping cart if I take more than 30 minutes to finish the order
- customer service
- ease of website use (to quote one of my favorite site design books, “don’t make me think!”)
- customer service – my favorite sock yarn store (aside from Blue Moon Fiber Arts, that is) is fast (generally within 30 minutes) to send me an email if they’ve run out of something I’ve ordered. They offer alternative colors, comparable yarn suggestions, and are willing to cancel if I don’t want to substitute. I’ve placed an order on Friday afternoon and had the package on my doorstep on Monday. Excellent customer service will get me to pay more for the product.
Would adding “content” to the site be appealing? For example, a tips and tricks section?
Only if you have something to say that isn’t generally available on a bazillion blogs.
How about tools like needle size charts, yardage calculators, metric/US conversions, etc?
Yes, as well as gram-ounce conversions, and yard-meter conversions. Alternative yarn and reasonable substitutions would also be good.
How about the ability to have your own personal page where you keep track of what size needles you have and post pictures of your projects?
As others have said, that’s what blogs are for.
Would having free patterns attract you to a site and then make you want to buy yarn, or would you just print out the pattern and then shop at your LYS?
I patronize my LYSs when I can – but they’re few and far between. I’m more likely to buy yarn from the site that produced a free pattern that I want to make.
Any other ideas to attract and serve knitters?
Word of mouth/blog… most of the on-line stores I patronize (there are only four I use for most of my purchases – two sock, two everything else) are the result of recommendations from people/bloggers I trust.
PM please, with your site? I’m always willing to learn about a new idea!
See? I told you in the sock thread that it’s nice to see a knitted swatch! Especially for the multicolor yarns.
Thanks again, all of you. I have shared the suggestions with Mrs Blather and we will be implementing as many as we can.
Speaking of free patterns, I just thought I’d link to my Column of Leaves Scarf and Hat pattern. I’ve posted it in various knitting threads before, but for those who haven’t see in, here it is!
What is cool about the page I link to above is that I have photos of over 30 different knitters’ scarves which they have made from the pattern, so you can see what it looks like in a bunch of different yarns.
Oh, I was just browsing through your patterns, and many of them don’t say what or how much yarn they require. I generally want to buy the yarn with the pattern, not get the pattern, find out what kind of yarn I need, and then order the yarn.