I don't prewash and the stabilizer in the fabric off the bolt helps keep it from distorting from cutting and piecing. If I do need to prewash a fabric (for example, to set the dye) then I starch it well before cutting.
You might want to search for a recent thread about a class from Kaye England (if my memory serves right). Apparently you can get less distortion by not ironing blocks while sewing! I haven't tried this yet, but plan to. Maybe someone has a link to that thread.....
For basting the layers, I don't think I'd risk a subsitute for spray starch. If I didn't have spray starch, I would pin or thread baste. I do use the washable Elmer's glue in teeny-tiny dots to get seams to match, but I would not want to try to use it to spray baste. And diluted starch by itself does not have enough power to hold layers together. I actually tried "glueing" two fabrics together with spray starch and it did not work at all.