Berroco Ultra Alpaca, being 50% alpaca and 50% wool, has the best of both worlds. I use it as my basic yarn for hats, scarves, gloves, just about everything. It's ever so slightly thinner than most worsted weight yarns, so unless you're a tight knitter it's good to go down a needle size when using it.
Pros: Soft enough to be worn next to non-sensitive skin, comes in a variety of rich colors, has a lovely drape but also stands up to wear. Also felts beautifully, for those felting fiends.
Cons: Ranging in price from $8.50 - $10 per skein, it can get expensive if you want to make something that requires more than one skein (hats take one skein, even large ones). For sensitive skin, it can be too scratchy.
This yarn is a beautiful yarn that can be used for any number of projects, and I can't recommend it highly enough!