Interesting Programming Exercises to Teach Inheritance?
I'm not as familiar with Python as I am with other languages, but I'm sure your students have played Minecraft.

If you haven't, I suggest taking a few minutes to find some introductory "Lets Play" videos on YouTube first. 

Let's talk Blocks. 

Minecraft has dozens of blocks. Dirt, some, water, colored wool...

All blocks can be broken, picked up, placed, stacked, stored in chests, and crafted together. But not all blocks do just those things. 

The chest let's the player store items in it. The furnace smelts some blocks into other blocks. Grass, when broken, drops a completely different block. Stone doesn't drop anything at all unless dug out with a pickaxe.

Minecraft can do this because of all of those basic methods that subclasses inherit and override. 

Take this method (not pulled from source, just based on):

public List&lt;ItemStack&gt; getDrops(World w, Pos p, bool harvest, int fortune, Random rand) {
    //basic implementation
}


The default implementation puts a single item (the block itself) into a list and returns it.

BlockGrass would put dirt into the list instead. 

BlockStone would check to make sure that harvest is true and the put cobblestone in the list.

BlockDiamondOre checks harvest and fortune, putting a different number of diamond items into the list, even determining how many based on the Random supplied. 

And so on.

There are roughly 100 different methods in the block class to handle all of the possible functionality. Update ticks (crops), neighbor updates (observer, torches), interaction (doors, chest, furnace, crafting bench), whether or not a block has a tile entity (chest, furnace), and on and on and on. Most of them are blank and do nothing, entirely up to the derived class to add to, if it needs it.

The same goes for items, some of which (like sticks) don't even have a derived class of their own because they do nothing special. They just exist and do everything any item can.

This is why the are so many mods for Minecraft that add so many new things: no one1 has to implement anything special in order for everything to Just Work. 

1Well, except Minecraft Forge, who maintain the official unofficial mod API. But Forge is a special kind of magic that isn't important here