The best diffuser I ever found was two-side-matte drafting film (either mylar or acetate). You get excellent diffusion and minimal light loss. The only problems with it are:

• it burnishes, so you have to be careful with pressure and rubs when transporting or storing it; and

• it's relatively stiff, so there are fewer options when constructing things out of it.

Another good material is frosted window film -- the sort of thing you'd use for privacy. You actually get a couple of different options here: frosted film gives very good, flat diffusion; while something with a micro-beaded texture gives a gradual radial fall-off with hotter highlights. This stuff is available by the foot at any home center.

If you want something that can be thrown casually into a bag without too many consequences, then a translucent white plastic shower curtain is a cheap option. It may be the last thing you want to have hanging in your bathroom, but it's good for photography.

I'd give muslins (beedsheets and so forth) a pass for most applications. Excellent diffusion, but they tend to block too much light. There's not a lot of point saving a couple of bucks on diffusers if you need to make up for it with tens or hundreds worth of more expensive lighting. That being said, it may be worth a trip to a fabric store to buy a couple of yards/metres of a white synthetic -- often they are woven of transparent yarns, and rely on the thread size/texture and weave density to give them the appearance of whiteness. Take a flashlight with you. You need to hit the right store at the right time of year, but you can often pick up something that's just as good as the expensive commercial products at a real bargain price in widths you can't get with paper products or drafting film. But if the fabric is in season or en vogue, it'll be on the pricey side.