The best arts-and-crafts shop in downtown Gatlinburg [1] is Arrowcraft (576 Parkway, 865/436-4606), a member of the Southern Highland Craft Guild and affiliate of Arrowmont School of Arts and Crafts. The gallery has a wide selection of crafts, from jewelry to pottery to hand-woven clothing, all made by regional craftspeople.
If you are looking for outdoor equipment and gear, head to the Happy Hiker (905 River Rd., 865/436-6000). For fishing gear, go to Smoky Mountain Angler (376 E. Parkway, aka Hwy. 321, 865/436-8746), next to the Smoky Mountain Winery.
Links:
[1] http://www.moon.com/destinations/tennessee/great-smoky-mountains/gateways-the-smokies/gatlinburg