Bone is the very best material for nuts and saddles. It has the hardness and strength to stand up to the beating its edges get from vibrating strings, and to faithfully transmit sound to the rest of the instrument.
A lot of controversy has arisen in the past around the use of ivory in musical instruments. Using ivory has been very hard on elephants and the other ivory-bearing animals. We 've decided that the best compromise is to use a material that would otherwise be thrown out. So every three or four years, I go down to the grocery and buy a bag-full of beef shank bones, and cook them up to get the meat off them. It's very important go get all the grease out of them, so if you do this, keep changing water until it is clear after you've boiled them for 15 minutes of so. Then the cleaning starts in earnest. Here's a good description of it.
After they have been cleaned and dried, I saw them into blanks on a tiny table saw made for the lathe. The saw blade I use for this gives an almost mirror finish to the bone, and holds dimensions within three or four thousandths of an inch. Bone dust flies all over the shop and it's a stinky business, but in a week I make enough for the next four or five years, and can get back to pleasanter stuff.
Something just feels right about being able to make Appalachian Dulcimers out of materials you find in hardware stores and food stores.