I've been doing this trick for over a year but I figured I would share it now that I have a blog. Since I'm super fair-skinned, no drugstore foundations or powders are light enough for me. I've resorted to higher-end foundation and compact powder, but this is what I've done for a loose powder that I favor the most: baby powder!
I started out with a loose powder container with a sifter section on it. With some elbow grease and a butter knife, I got out the sifter (in the process breaking off a shard of the plastic on the side, which was easily taped back on). I then emptied out the original powder contents, filled it with baby powder, and put the sifter back in. Voila!
To refill I just pour some more from a large bottle onto the top and gently shake the container side to side until it has all sifted through. I use Walgreen's brand baby powder and it lasts forever and is cheap. I prefer baby powder to usual powder because it's white of course, clean, never cakes, absorbs oil, and I like the smell. Plus, the less chemicals the better.
It could probably also be used for darker skin because it's so translucent.

Refilling container