from My Ballard, don't know if it's still relevant:

http://www.myballard.com/2009/06/17/recycle-your-bottle-caps-at-the-sneakery/

Recycle your bottle caps at The Sneakery
Posted by Geeky Swedes on June 17th, 2009

Ever wonder what to do with those plastic “twist on” bottle caps (like from water bottles)? The Sneakery (612 NW 65th St.) has found a solution:

I’m probably not the only one who cringes every time I throw a cap in the trash when I put a bottle in the recycling bin. I don’t understand all the politics and science of recycling, but thankfully someone has found a way to get these caps into the proper recycling facility. Aveda salons has started an ongoing program called “Recycle Caps with Aveda” to address this issue and I’ve started a collection at The Sneakery which I plan on taking to the drop-off point downtown. I’d like to invite anyone else who wants to see their caps go somewhere with a purpose to drop them off with us. The Sneakery is not affiliated with Aveda in any way, this is just something I heard about and want to participate.

Thanks Drea for emailing us.

We give ours to my kids elementary school (Stevens on Capitol Hill). I believe that they use them for exactly what Cedarthvader said.

Check with local art schools and elementary schools to see if they take them. They make great cheap paint palettes.

I've heard Aveda takes them and makes their skin care product packaging out of them...but I've never actually verified that for my own self.

If you feel you must throw them away, make sure you have them bagged up securely in your garbage. If they are bagged and placed in a City of Seattle garbage can there is minimal risk to wildlife.

Ditto re: art projects...haven't heard of any other alternatives...

For those small lids, especially bottle caps, I don't know of anything else to do with them other than throwing them away, if you can't use them for art projects or something as the others mentioned.

I've noticed they do recycle bottle caps and small plastic lids for containers at the UW, but we have to put them in separate containers - maybe this has something to do with economies of scale?

Besides, you should whittle your own lids out of driftwood - it makes a great seal and you can give them to people for presents.