I learned how to make a monkey fist knot at a juggling festival a few years ago -- just for fun I made Dodger a toy out of rope that managed to keep him busy for at least a few days...
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Signing UpStep 1: Materials
Scissors or a sharp knife to cut the rope (Be carefull!)
Lighter to melt the rope ends, to prevent fraying.










































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Nice)
http://www.instructables.com/id/Rope-Dog-Toy/
You might not know this, but the surface on tennis balls is similar to sand-paper. Even the ones sold in pet stores as a pet toy. This sand paper like surface can quickly wear away the enamel on your dog's teeth. I'd recommend something like a hockey ball instead.
Also, the technical term for a squeaky toy is....get ready for it...an OOEY :P
I had some of the same rope left over from making some long lines for dog training. (I'll have to post that as an instructable. ~$20 for 4 vs $20-$40 each from a pet supply store or online.)
I think this toy would be good to train tracking or retrieving. You could either put something soaked in a scent inside the monkey fist (You'd have to leave the knot a little loose.) or soak it with scent. I also think the braided parts are a pretty good analogue for wings. If you wanted to train water retrieving you could possibly tighten the monkey fist around something buoyant enough to make it float.
Here's my effort: