So my friend is planning to have her wedding reception in a church gym. With the extremely high ceilings, padded walls, and tight budget, does anyone have suggestions on decor? We are researching classy, economical ideas that can both cover up the baskballs hoops, matted walls, etc. and, also, make the space more intimate.

Is the wedding in the daytime or evening?  If it's evening then it could be easier masking the perceived negatives, ie blue mats and hoops. 

If it were evening, then using lighting would be an inexpensive way to make the space feel more intimate you could also leave the negatives in shadow.  For example, getting/renting/borrowing 4, or more depending on gym size etc, tall palms, ficus or other tall tree, to mark the 4 edges of the reception area, a few feet in from the actual wall.  Use 5.00 uplights from Lowes or Home Depot to illuminate the trees and leaving the main gym lights off would draw a “line” at the edge of the light.  You could also wrap the trees in rope lights.  Using minimal overhead lights and a lot of candles on the tables will also pull the eyes inward from the edges as well.  I am totally thinking of the way my high school gym looked during a dance, overheads off and low lighting in the center of the gym seemed to “transform” the gym and make the edges receed.

For daytime I would do something similar using trees or something tall to deliniate your edges and using some really lightweight fabric or tulle, you could “swag” between the plants to create almost “soft walls” so you can blur what's behind the edges.  Again to make it more intimate I would make the tables as pretty as you can so the focus is down at “eye” level and not wandering to what you are trying to hide.  Also bringing color into the center of the room, in linens, could bring the focus in from the walls.