Material & Tools
+ Metal pen
+ Piece of conductive foam - high density 2"x1/4" 1/8" to 1/4" thick
this is the foam material that computer chips are frequently shipped with
+ A Q-Tip or other cotton swab
The most signifiant challenge was finding an existing pen, made with metal and having an opening large enough to support a good sized tip end. Amazingly I found an ideal solution with the Zebra Telescopic Bright pens. They have everything we need as well as a cool telescoping feature.
Here are my Amazon links:
Zebra Tele-Scopic Ball Point Pen
Zebra Telescopic Brights 2 pack
I found one for about $3, but last I looked prices were $4 to $5 per pen.
The second challenge is finding some conductive foam. I had a bunch lying around, if you don't, find someone who works with electronics, they probably have a bunch. This is the foam that computer chips are often shipped with. Although you can buy sheets of High Density Conductive PU Foam, the typical 12"x12" will cost you about $8 and will give you way more than you need, enough to make more than a couple hundred stylus tips.
With your Zebra pen, conductive foam, your scissors and a cotton swab, you are ready to make your stylus.
(WARNING: Be careful that you have some soft conductive foam, test to make sure you have something that will not scratch the surface of you screen. You can also test how well it conducts by just holding the foam and tapping the screen. I've heard suggestions of aluminum foil and steel wool, I would not get them anywhere near my screens. And, if you are curious how the touch screen works, here is a good explanation: http://electronics.howstuffworks.com/iphone2.htm )